The Chief Financial Officers speak their mind on the Budget proposals for the next fiscal announced by Finance Minister Arun Jaitley.
Sunil Sayal, CFO, Nokia Solutions
On the macro side, this Budget has put aside a larger proportion of resources for the upliftment of social standards and the rural population, namely education healthcare, insurance, infrastructure, minimum support price (MSP) for crops to be 1.5 times the cost of cultivation. It is a very welcome step.
However, I find that some of the announcements may be just Statements of Intent as the execution part is not touched upon.
As an example, would we have enough hospitals, medical facilities, medical doctors and medical educational institutions to accommodate the 10 crore households to which the Rs 5 lakh health insurance cover will be applicable? As of now, we are unable to even manage the existing hospitals which are languishing for want of doctors, equipment and maintenance money. Healthcare is a state subject and, hence, I have my doubts if a state buy-in has been obtained and funds provided to them.
The fiscal deficit has been steadily coming down and the trend would have been maintained had we achieved our budgetary target of 3.2 per cent of the GDP. The downward trend of the past many years has been reversed for the first time since 2012, with the fiscal deficit slated to go upto 3.5 per cent. This is clearly a setback given that the direct taxes collection went up (thanks perhaps to demonetisation), government exceeded its divestment target, FDI is good, and a healthy surplus generated from the tax collection on oil even when the crude prices were low for the first six months of the year, etc. Our inability to keep the trend of fiscal deficit sloping southwards is not a good sign and will raise eyebrows in the international arena.
On the fiscal side, the unkept promises by any government has a direct and negative effect on its credibility. A clear statement was made by the government that over the five years ending 2019 the corporate tax rate will be brought down to 25 per cent, but we only see some cosmetic effects. Same is the experience on surcharge on tax applicable after a certain threshold once made by Pranab Mukherjee when he was the FM.
The LTCG is a welcome step but what is amusing is the changing stand of the government on taxation of gains on shares and securities depending upon the stock market behaviour!
Kapil Bagadia, CFO, Ernst & Young Services Pvt Ltd
The Budget, this year, is a balanced one. However, the focus, it seems, is on the 2019 elections. The Finance Minister has been liberal towards rural India, announcing a long list of measures to ameliorate the current situation and augment the growth of the rural sector. Although it is difficult to gauge the impact of the schemes and measures announced and if how will the benefit trickle down to the ultimate beneficiary, the intent is clearly positive.
The re-imposition of long-term capital gains tax on profits from shares and equity mutual funds was anticipated. This is a right move in principle but allowing indexation would have given some soothing effect.
Thanks to GST, there was nothing huge on the indirect tax side. However, the increase in the basic customs duty is a move to incentivise the indigenous industry, clearly signaling the overseas investors that the route to India is through 'Make in India'.
Alok Bansal, Co-founder & CFO, Policybazaar.com
The 2018 Union Budget presented by Finance Minister Arun Jaitely on February 1 has given much needed push to the rural sector and social security. The Budget, however, does not have much for the corporate and salaried classes to be happy about.
The most welcome feature in the healthcare sector is the introduction of a new flagship National Health Protection Scheme, which will provide health insurance cover of Rs 5 lakh per family per year. The scheme aims to provide crucial health cover to 10 crore “vulnerable” families accounting for about 50 crore beneficiaries. The scheme’s implementation plan that the government will unveil soon should allay the fears regarding the funding of such a huge scheme.
The Budget has been kind to senior citizens, who can now claim a deduction of Rs 50,000 on the premium they pay towards medical insurance. This is what we had recommended to the finance ministry, and we are grateful that our recommendation has been accepted.
The micro, small, and medium enterprises (MSMEs), which suffered due to demonetisation and the hurried implementation of the goods and services sector (GST). They have been given a comprehensive package including extension of the cut in the corporate tax rate introduced last year from 30 per cent to 25 per cent to companies registering a turnover of up to Rs 250 crore.
The re-introduction of long term capital gains tax has not gone well with investors in equity and equity mutual fund units. The stock market tanked more than 800 points a day after the announcement. Grandfathering of gains till January 31 appears to have not helped much because investors apparently preferred to sell and book profits in order to avoid paying the 10 tax on long term capital gains. The failure to meet fiscal deficit targets has also not been welcomed either. Bond markets are also expected to be impacted adversely due to the new glide path for deficit reduction. It seems if yields go up, interest rates paid by firms and households will also rise.
Salaried classes were expecting rebate in the income tax limits. Mr. Jaitely, however, chose not to announce any changes in the I-T slabs for individual taxpayers.
Lalit Malik, CFO, Dabur India Limited
The Budget is, as per expectation, an election Budget with the focus on rural and infrastructure development and capital gain tax on long term capital gains, though increase in fiscal deficit may increase inflation and interest.
R Nagarajan, Chief Financial Officer, Sri City (P) Ltd
The thrust of the Budget is on the much needed government’s mission to strengthen sectors like agriculture, rural, healthcare, MSME and infrastructure.
Though there were no notable innovative reforms, yet considering that the fiscal deficit for 2018-19 is pegged at 3.3 per cent of gross domestic product, (slightly higher than expectations of 3.2 per cent), it is fair to comment that “this Budget dictated to help achieve re-distributive & equitable growth”.
Recognising that a vibrant equity market is essential for the economic growth, proposal to levy 10 per cent tax on LTCG on shares/securities/equity oriented funds and keeping the taxes on salaried class unchanged was debatable.
Reduction in corporate tax rate to 25 per cent for companies having a turnover of less than Rs 250 crore is a very welcome step. Also, the deduction allowable for new employment generation for specific industries in MSME category is a clear indication for job creation, investment and Make in India campaign.
Tax incentives to senior citizens was meaningful and very much relevant considering our social security scenario.
Increasing customs duty to incentivise domestic manufacturing of many items, including cellphones, smart watches, perfumes and juices indicates clear policy reform. Now, the message is loud and clear – ‘Manufacture in India, if you want to access the Indian market’.
The Economic Survey had already pointed out that reviving private investment might be difficult and argued for the need of a compensatory increase in public investment to revive growth. The Budget has crafted a balanced strategy to meet the objectives of boosting redistributive and equitable growth, reviving investment and fostering entrepreneurship.
In nutshell, leaving more money with the rural economy, which is unarguably the backbone for our country, has to be looked as a progressive step for the economy. But this is subject to the implementation of these schemes in true spirit.
Sanjeev Jha, CFO, Kelly Services India
This has been a positive Budget on a lot of fronts, with public welfare initiatives being announced around health, education and promoting farmers. This will help the overall economy and eventually lead to creating more employment and growth. MSMEs stand to benefit with reduced corporate tax of 25 per cent for companies having a turnover of up to Rs 250 crore. Also, temporary staffing being opened to all sectors will now help generate more employment and will contribute to overall growth.
Satish Kottakota, CFO, CallHealth Services Pvt Ltd
I appreciate the focus on healthcare for low-income group as well the lower corporate tax for less than 250 crore turnover companies. It’s a letdown for the salaried class. Long term capital gain tax (LCGT), as understood, is a low lying fruit to fill the deficit and the percentage is not high. I had expected some simplification of the tax system as well some encouragement for foreign investments/startups. It’s a disappointment.
Alok Bajpai, Global CFO – Finance, Accounts & Legal, Netmagic Solutions
Let me express my overall satisfaction for a Budget that, though being a slightly populist before the election year, has genuinely tried to focus on the weaker and poorer sections of the society and on small businesses. Its isn’t a big bang Budget or a Budget that dazzles, but it, surely, is the one that endeavours to bring more deep rooted and wider changes at the grassroot level.
Though it's ironical that even after seven decades of Independence we are still fighting for a comprehensive and efficient healthcare or education ecosystem, yet it's heartening to note that the government has taken bold initiatives in this Budget to bridge the gap in these sectors. The sheer size and coverage of some of these announcements – be it the healthcare programme for almost half of our population, or the investment in the infrastructure sector like aviation – are of well meaning and surely very ambitious and audacious. I do appreciate that the real test of the matter will be in their execution, but full marks to this government for, at least, for their attempt to propose them in the Budget.
Anoop K Joshi, President, CFO & Company Secretary, SRF Limited
This is an excellent Budget, which has set the direction for the growth the agriculture and rural economy. The proposals show the commitment of the government for the rural sector in a prudent and well thought out manner. The public health insurance is a great initiative. The execution will be the key, though.
On direct taxation, there is not much except the long term capital gains tax, which I think, is the right kind of income to contribute to some of the social initiatives. I think people have made good money in the capital market and don’t mind sharing a part for the development of economy.
Joydeb Chatterjee, Senior VP & CFO – Technical Textiles Business, SRF Limited
It's populist Budget ahead of election to woo people. Great move to provide medical cover to the poor, but not sure where the funds will come from. The government also has proposed to give give fair price to farmers, I am not sure how it will be implemented. There is nothing for the salaried class. There is standard deduction of Rs 40,000 but increase in education cess from 3 to 4 per cent is very disappointing. Reduction in corporate tax for small companies has been recovered from 10 per cent long term capital gains tax without indexation. There is more focus on Make in India with increase in customs duty on certain consumer durable products. Social welfare surcharge is imposed on many products including import of petrol and diesel. India is a net importer of petrol, which means that cost of fuel will go up and it will be a hardship to consumers.
Rostow Ravanan, CEO & Ex-CFO, Mindtree
The Budget balances the need for fiscal discipline against the political gains required in a pre-election year. We are happy to note the government’s interest and Budget allocations to areas like Blockchain, AI, and digital. We are also interested to learn more about the largest social insurance scheme planned by the government – this could be a large opportunity for using technology to deliver superior outcomes.
Jatin Dalal, Chief Financial Officer, Wipro Limited
The Budget has largely delivered on the socio-economic agenda for strengthening the agricultural and rural economy, healthcare, infrastructure and education in the country. On the tax front, while reduction in the corporate tax rate for companies with turnover less than Rs 250 crore is a step in the right direction, it would need to be followed up with further rationalisation in the form of broad based reduction of MAT and corporate tax rate. We welcome the greater push for digitisation and increased transparency in administration. The introduction of new scheme for e-assessments across the country would lead to reduced tax administration cost and increased tax payer satisfaction.
V Kumaraswamy, CFO, JK Paper Limited
It's a balanced Budget, which will benefit both formal and informal sectors. Stress has been more on rural sector and it is not corporate biased. It is an inclusive Budget, which will induce growth in the times to come.
V Ramakrishnan, CFO, TCS
This is a forward looking, growth-oriented Budget with focus on the rural economy, healthcare for the poor, investments in infrastructure, digital skilling, education and jobs creation. Several programmes announced in the Budget represent big strides in building a Digital India — outlay for the smart cities programme; plans to explore blockchain technology; national programme for adoption of artificial intelligence and for research, training and skilling in cyber-physical systems; innovative use of technology to digitally reimagine agricultural markets to empower small and marginal farmers; and the extending of broadband access to 5 crore rural citizens to bridge the digital divide. Lastly, having partnered the State Bank of India in their highly successful and seamless merger with six associate banks, we are excited about the planned merger of the three public sector insurance companies. I would give 8 out of 10 to this Budget.