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Budget 2017 - 2018
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Mr. Killol Pandya, Head - Fixed Income, Peerless Funds Management Co. Limited
The budget seems to be well-balanced. The government appears to have done a reasonable job of managing growth requirements, social development, nation building and managing the fiscal deficit and inflation. From the domestic bond market perspective, the borrowing numbers seem to be manageable. We may consider the budget as mildly positive one.
 
Mr. Milind Kothari. Managing Partner & Head of Direct Tax, BDO India
The Finance Minister enlightening the Parliament to the extent of non-compliance and the shifting of burden of tax to compliant taxpayers provides insight about the challenge in front of the Tax administration in the coming years. The FM is correct that the data made available because of demonetization would be greatly facilitate this move.
 
Mr.Dipen Shah, Sr. Vice President - PCG Research, Kotak Securities
The budget has been along expected lines on most fronts. It has delivered on our expectations of increased spends on infrastructure as well as on agriculture / rural areas. Also, the fiscal deficit has been projected at 3.2%, which is in line with our expectations of 3.4%. The budget has provided relief to lower income assesses by reducing tax rates in the Rs.2.5 lac – Rs.5 lac bracket. For the markets, the fiscal deficit of 3.2% is positive as it means interest rates can be lower further during the next fiscal. Also, absence of any changes in capital gains tax is a positive as these apprehensions have been erased. Focus on markets will now shift to the global factors and the remaining quarterly results.
 
Mr.Dhiraj Relli, MD & CEO - HDFC securities
FM's fourth Budget, has put India back on the shopping list of FIIs. By restraining the fiscal deficit to 3.2% and promising to prune it down to 3% in the next year, FM has delivered on Fiscal prudence. All this has come about amidst 25% hike in government spending and a 19% reduction on Government borrowing. This also increase chances of a rate cut. The government had a tough call of treading very carefully between the need for stimulating demand in a weak economic environment after demonetization and continuing on the path of fiscal consolidation. It needs to be complemented for bringing in greater transparency in political funding and relaxing the domestic transfer pricing rules. It has allocated higher sums for farmers, rural population, youth, poor & underprivileged, infrastructure etc which will have a ripple effect on the formal economy with a lag. Another good step taken in this budget is that the term for eligibility of long term capital gains tax on house property has been pruned down from three years to two. This would mean that investors can sell their house property a year earlier and still be eligible for lower tax. But what is more striking is the fact that basket of financial instruments has been expanded, which gives the investors more option to invest and still avoid paying tax. This will have very far reaching impact on the financial markets. This will unlock the real estate investments and divert them to financial instruments, which would be beneficial for GDP as these will have a higher velocity. There is no Increase in service tax to bring it in line with proposed GST rates. It is not an anti rich and pro poor Budget. But FM's best action is that he has not tinkered with the equity capital gains tax regime. The markets are rejoicing that they can continue to enjoy the fruits of investment. All said and done there have been a few disappointments. There has been no cut in corporate tax rate (for companies having sales of more than Rs.50 cr) despite assurance in FY16 Budget to cut taxes to 25% by FY20-FY21. Achieving this level over the balance period is challenging. There has been no mention about creation of a Bad bank or Public Sector Asset Rehabilitation Agency which can speed up solutions for rising challenges of NPA for Banks and loss making PSUs. Though a lot of funds have been allocated for public capex, very few initiatives are visible for kick starting private capex (though there is a limit upto which the Govt can do this). This growth oriented budget will make the FIIs return to India.
 
Suresh Soni, CEO, DHFL Pramerica Asset Managers
The budget 2017-2018 is a well-balanced growth oriented one adhering to fiscal consolidation roadmap. Growth estimates for direct and indirect taxes look realistic and credible. Thrust has been given to sectors like cement, housing, infrastructure and impetus to the rural economy would boost consumption. Lower corporate tax for small and medium scale enterprises is another fillip across industries. Banning cash transactions above Rs. 3 lakhs would also facilitate digitization and reduced transactions in parallel economy. Absence of any populist measures before state elections and no changes in capital gains tax on securities or service tax would be cheered by the markets. The budget does not seem inflationary and sticking to the path of fiscal consolidation with credible estimates would also give headroom for further monetary easing by the RBI.
 
Mr. Anil Sachidanand, MD & CEO, Aspire Home Finance Corporation Limited (A Motilal Oswal Group Company)
The current budget gives adequate stimuli to the demand as well as supply side that would further boost the affordable housing space towards realization of the mission "Housing for All by 2022". Extension in the tenure under CLSS scheme of PMAY from 15 to 20 years, Increasing the allocation under PMAY to Rs.23,000 crs and Rs.20,000 crs allocation to the NHB for refinance would improve the credit access at retail level thereby bringing more number of EWS/LIG/MIG families under the ambit of Government schemes. Government of India's commitment to finish 1 cr houses by 2019 for those living in kachcha houses will give a strong fillip to housing in rural areas. Relaxing the incentive norms under affordable housing units especially reclassifying the unit size (30-60 sq m) measured as build up area to carpet area and also applicability of the bigger size units to the extended areas of metros will boost the supply side dynamics in affordable housing and bring more number of houses. The long awaited to demand of industry to grant affordable housing an infrastructure status was finally accorded in the budget. The budget announcement according "INFRA" status to 'Affordable Housing Space" will now increase supply of houses in the range of 10-40 lac with corporate houses, builders, developers refocusing their business in this space to take advantage of being classified under INFRA. I expect the housing price to come down by 5%-10% in this space as supply will improve with mass township, large projects coming in affordable space. This will help in enabling credit at retail and the project level at lower rates thereby helping to increase the housing stock and also benefiting the end user in this segment who is mostly a first time home buyer.
 
Mr. Pranay Bhatia, Partner – Direct Tax, BDO India
If the market reaction was the indicator, FPIs appear to be a happy lot. The much awaited relief from indirect transfer provision sees the light of the day. There is a proposal to provide a blanket exemption to category I and II FPIs from the indirect transfer provisions. There were expectations in relation to changes in the law to provide clarity on GAAR applicability to FPIs. It appears that, for now, the clarification provided through a recently issued Circular as regards inter-play of LOB provisions and GAAR shall be the only guide. This leaves some other issues around impact of selection of jurisdiction and availability of treaty benefits open to interpretation. Capital gains regime for investment in shares appears to remain untouched with no announcements in the speech. This is a welcome relief to continue providing impetus to investment inflows in Indian capital markets. The industry had recommended that specific provisions like the threshold limit of holding of 5% and investment limit of 50% of assets and INR 100 Mn be increased. With specific carve out for FPIs, the amendment will not benefit other PE and VC investments in India. Therefore, indirect transfer provisions, in the proposed form, continue to apply to funds other than registered FPIs. This could severely impact inflow of foreign exchange and may also fail to boost the much wanted start-up initiatives. However, there is a proposal to exempt redemption of shares or interest outside India from indirect provisions where such transfer is taxable in India. This partially addresses the concerns of possible double taxation. The fine print of the proposed changes will throw more questions than answers for PE and VC funds to deal with.
 
Dr. Suresh Surana, Founder, RSM Astute Consulting Group
The Medium and Small Enterprises which constitute more than 96% of the companies filing their tax returns have been provided a huge corporate tax rate cut. It has been proposed to bring down the corporate tax rate to 25% in case of companies having a turnover of upto Rs. 50 crores in Financial Year 2015-16. This is a major relief as both the companies in the manufacturing and service sector, who are facing pressure on their bottomline and would improve the cash flows. This reduced tax rates would be a balancing act for all the companies who are bracing for a higher rate under the proposed GST legislation.
 
Mr. Rajiv Gandhi, CEO & MD, Hester Biosciences Ltd
Government’s objective is long term growth and it is trying to rationalize all issues for a good sustainable growth in years to come. High allocation to rural sector has set the right tone. Giving relief to smaller businesses and taxpayer was much needed to widen the tax net as well as incentivize businesses to come into the main stream of financial legitimacy. Initiatives on women empowerment, rural electrification, housing for all, more roads for villages and focus on employment generation will definitely strengthen the rural economy.
 
Mr.Ajay Bodke (CEO & Chief Portfolio Manager: PMS), Prabhudas Lilladher.
In the midst of grave global & domestic challenges, the Finance minister has done a commendable job. He has adroitly balanced fiscal pressures and stuck to the fiscal deficit target of 3.5% of GDP for FY 17, slightly increased the deficit target from 3% to 3.2% of GDP for FY 17 and controlled net market borrowing target for FY 18 to Rs 3.48 trillion. A benign appetite for government borrowings in FY18 signals availability of more resources to productive sectors at lower rates. This should spur aggregate demand in both consumption & investment. While adhering to fiscal rectitude, the FM also helping spur growth impulses in the economy by aggressively increasing allocation of capital to key sectors such as rural, agriculture & allied sectors by a whopping 24% to Rs 1.87 trillion and infrastructure sectors like roads, railways etc that have a medium-term multiplier impact on economic & employment growth to Rs 3.96 trillion. This is all the more significant as the domestic economic engine is almost entirely dependent on government’s pump priming in view of anemic trends in private sector capex. Markets have rejoiced as the fears of extending long term capital gains tax tenure from 1 year to 2 years has not materialized. We expect interest rate sensitive sectors like Banking & financial services (BFSI), Auto & auto ancillaries, cement, construction and consumer goods to outperform in view of the boost that the Budget has provided. The medium term trajectory of the market would depend on the revival of earnings cycle that continues to remain tepid over the last few years, impact of remonetization and GST (post implementation which is widely expected from 1st July 2017) on India’s economic growth as well as challenging global headwinds in view of fierce protectionism, barriers to free trade, rising interest rates in the US and hardening of global commodity prices especially crude.
 
Mr. Ramesh Vaidyanathan, Managing Partner, Advaya Legal
The budget has been big bang as far as infrastructure is concerned, as is evident from the increased allocation for the sector. The sizable government spend on this sector is expected to have a multiplier effect in kick-starting consumption and increasing economic activity. Some of the specific initiatives proposed are the following: New Metro Rail Policy and Metro Rail Act to be enacted to increase participation of private parties in creating and operating metro rails. This will hopefully give the necessary fillip to urban transport infrastructure and help decongest our cities. Since the success of metro projects depend heavily on the state governments, private capital will only step in where there is a buy in from all key stakeholders. The idea to build a 2,000 kilometre coastal road to improve connectivity between villages and major ports is welcome. This will hopefully provide SMEs and MSMEs located in rural areas access to world markets. A new wave of PPP airport projects are envisaged for Tier-2 cities. In addition to this, the Airports Authority of India Act, 1994 is proposed to be amended to facilitate the monetisation of land held by AAI. It will be good for the government to learn from the Delhi and Mumbai airport PPP projects and keep affordability as the key objective. AAI lands are idle resources that can help fund the RCS proposed under the new Civil Aviation Policy. In order to facilitate the resolution of disputes for large and complex projects in the infrastructure space, a new legislative framework is proposed to be implemented within the ambit of the Arbitration and Conciliation Act, 1996. This is welcome. Hope the amendments explore various internationally tested alternative dispute resolution mechanisms for construction projects. The proposal to grant infrastructure status to affordable housing projects is a great idea. Here again, it could have been combined with an increase in tax exemptions on interest payments, which did not happen. The reduction of the long term capital gains period to 2 years will drive more real estate transactions and help improve sentiment. It was heartening to hear that Railways will tie up with private logistics players to provide end-to-end multi-modal solutions for the transport of goods, especially perishables such as agricultural goods. This will give transporters a single window mechanism to transport their goods to different parts of the country.
 
Benoy CS, Director, Digital Transformation (ICT) Practice, Frost & Sullivan.
From an overall ICT industry perspective the impact of budget 2017 is quite neutral. There were no major announcements that will help or adversely affect the industry. However, the plan to increase the budget allocation to Bharth Net from INR 2,700 crore to 10,000 crore is a very good move that will accelerate optical fibre network roll out in rural areas. It will not only improve the rural connectivity, but also will help in a long way in bridging the digital divide between the rural and urban areas. Moreover, the government’s initiative in promoting digital economy is a positive step which will help ICT industry in long run. However, this budget turned a blind eye on the global challenges facing the IT Services industry, which was expecting some soothers from the government to help effectively compete at the global level. Increased infrastructure spend, reduced tax rates for MSME sectors and lowering income tax rates are a few other good initiatives that boosts consumer spend, which in turn will have a positive bearing on the IT and telecom industry.
 
Mr.Jatin Dalal, Chief Financial Officer, Wipro Limited.
I commend the Finance Minister for delivering a Budget that is a clear continuation of policy direction. The Budget’s focus on investments in infrastructure creation while easing private sector’s access to credit will generate jobs and increase productivity. The thrust on digital economy, deployment of analytics in tax administration and initiatives on cyber-security demonstrate the significance of Information Technology among Government’s priorities. Corporate India welcomes the initiatives to expand the tax base and eliminate evasion. While the targeted proposals on corporate taxation are welcome, progressive steps towards achieving competitive tax rates could have attracted global investors.
 
Mr. B J Maheshwari - Whole Time Director & CS cum CCO(Chief Compliance Officer). Dwarikesh Sugar Industries Ltd
Budget 2017 covered a number of issues being faced by the agri and rural sector. As far as agri sector is concerned, overall the Budget 2017 looks encouraging, with the government’s commitment to double farmers Income in the next 5 years. Announcement on corporate farming was welcome and the sector would look forward to have more clarity on this during the coming days. Mini lab in Krishi Vigyan Kendras, expansion of National Agri Market and increase in irrigation and insurance coverage are welcome step for farming sector.
 
Mr. Rakesh Tarway, Head of Research, Reliance Securities
Government has presented a reasonably positive budget, given the constraints, from equity markets perspective. No changes in capital gains for listed securities and concessions to FPIs will soothe market nerves. Adherence to fiscal deficit target of 3.2% and roadmap for the same is good for sentiments. Sectorally, housing and rural spending has received a good boost by major announcements. Middle class has also been given tax concession, which is good for consumption of basic goods
 
Mr. Kamlesh Patel, CMD, Asian Granito India Ltd
Infrastructure status to affordable housing is the biggest positive announcement in the budget. This will help achieve government target of construction of 60 million homes under initiative of Housing for All. Another big push for the industry is reduction of custom duty on LNG from 5% to 2.5%. Abolition of Foreign Investment Promotion Board (FIPB) will attract more FDI in real estate. Reducing corporate tax by 5% i.e from 30% to 25% will give major relief to unogranised small scale players in Morbi-Cluster. Allocation of Rs. 23,000 cr for Pradhan Mantri Awaas Yojana and target of completing 1 crore house by 2019 will give a big boost to the tiles industry. Proposed changes for considering carpet area instead of built up area for the scheme for profit-linked income tax deduction for promotion of affordable housing are steps in the right direction. Special stimulus is provided in the budget to middle class, rural economy & farmers, youth & education, infrastructure & employment and thus will give big push to economy and help it achieve GDP of 8% plus in coming time. Sanitation coverage in rural India has gone up from 42% in Oct 2014 to about 60%. Disappointed that corporate tax not reduced.
 
Mr. Dinesh Thakkar (Chairman & Managing Director, Angel Broking)
This is an efficient and sensible budget and continues to follow the theme of maintaining fiscal discipline seen in the last two budgets. The focus continues to remain on improving the macros as government has not succumbed to the populist expectations. The fiscal deficit target of 3.2% for FY18 should further reinforce the lower interest rate bias and a positive outlook on the economy. There is also no negative announcement for the capital markets which should continue to attract foreign inflows. Affordable housing sector, with 100 percent deduction for profits upto 60 sq meters in non-metro cities, has got major boost and we believe this is likely to be positive for sectors like real estate, construction, cement, building materials, NBFCs, etc. The focus on agriculture and rural sector should help sectors like agrochemicals and fertilizers while lower income taxes should help in reviving the consumption demand. Overall we believe that this is a good budget.
 
 
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