The experts have given mixed reactions to the announcements made by Finance Minister Arun Jaitley in his Budget speech today. Here is what they say:
Vishesh C Chandiok, National Managing Partner, Grant Thornton India LLP: Overall, Budget 2018 is very much aligned to the macro-global direction – reduction in corporate tax rate, protecting domestic industry by increasing customs duty, and supporting all major government schemes including Digital India, doubling farmers' income by 2022, Make in India, Clean Ganga, etc. Health and social security to take care of the weakest sections of the society and tackling our toxic air pollution will truly transform India into a vibrant economy.
Dr. Keshab Panda, MD & CEO, L&T Technology Services: We welcome the government’s thrust on encouraging R&D pursuits in the areas of AI, machine learning, robotics and edge analytics. This move will further leapfrog the innovations in this space that is significantly driven by Indian companies and will place the country at the centre of global digital transformation focus.
B Padmanabhan, Consultant & Advisor, Varroc Group: The government has focused on the development of the rural economy, agriculture, infrastructure and railways. Here my concern is the effectiveness with which these proposals are going to be implemented at the ground level.
Increasing MSP (minimum support price) to 150 per cent of the cost of goods is, no doubt, a laudable measure. But here also, the proof of pudding is the delivery of the desired benefit to the intended targets. Further, apprehension in this proposal is that it has got the potential to create inflationary spiral, which is not good for the economy. It will further cause increase in bank rates dampening the industrial growth. Any further steep increase in the crude prices coupled with the above measures will increase the current account deficit and make the fiscal deficit management a herculean task. This may adversely affect the the country's sovereign rating in the eyes of international credit rating agencies.
The socially oriented proposal aimed at achieving better health for rural population is really a good intended proposition, but it will require huge funding for implementation and also require strong system and process for effective delivery.
I am not sure as to whether the increase in BCD and levy of social welfare charge (@ 10 per cent) will directly result in achieving the vision of ‘Make in India’, but it will definitely be inflationary in nature.
Taxing LTCG and levying DDT on equity oriented mutual fund are not correct, according to me, as it may tantamount to double taxation.
If FM wants to increase the tax base, a beginning should have been made in this Budget to levy a small amount of tax (5 to 10 per cent) from the elite section enjoying agricultural income of, say, more than Rs 50 lakh to start with. When they are going to enjoy the fruits of all the above proposals to be funded out of other tax payers’ money, they are also expected to return something back to country. But, obviously the political reasons come on the way of this by the government.
Above all, I am positive with this Budget for the simple reason that all the proposals, if implemented properly, will act as growth engine to catapult the inclusive GDP growth and result in a lot of employment generation opportunities and will more than compensate a lot of theoretical apprehensions as expressed above.
Kris Lakshmikanth, Founder Chairman & Managing Director, Head Hunters India Private Limited: There is nothing much extra for the job seeker directly. The PF benefit which government has announced was there earlier too, but not many takers. They have made some slight modifications. These will help possibly, to some limited extent, in generating new employment.
The rural focus should help in generating jobs, more of short-term nature in the farming sector.
Hopefully, it will reduce migration from rural to urban India. Unfortunately, the children of farmers, in general, are not interested in farming as is well known and I don’t see the exodus reducing.
The health scheme can lead to new jobs in rural India. We have to wait for details to predict more.
The investment in roads & railways will generate jobs for manual/construction labour. It is good for the nation and for the job hunter.
The affordable housing sector has not received any special benefits. It is well known that the housing sector is slow. The housing sector, by its very nature, creates innumerable jobs. The slowdown in this sector has affected jobs across India is a well known fact. The Budget has not taken any special measures to boost house construction.
For educated graduates/post graduates, there is hope due to the focus on Digital India & increased emphasis on Connecting India.
The GIG economy like Uber, Ola etc are to be encouraged. I don’t see any special measures for them.
Similarly, the logistics, supply chain sector has not been given any special concessions for creating jobs. This is a sector, which can easily absorb thousands of people with minimum education.
The government has been talking about Skill India. However, I don’t see much action on the ground. There is demand for drivers, cooks, masons, plumbers, carpenters etc. Besides the IITs and IIMs, the government should look at establishing centres in every district/taluk to bring out skilled labour. If the government machinery can't do it, then they have to do it on a PPP model.
Suresh Nandlal Rohira, Partner, Grant Thornton India LLP: With the powers being disseminated to the GST Council, expectations weren’t significant on the indirect tax front. However, a broad-level roadmap on bringing petroleum sector under GST could have brought some relief to the surging prices on petroleum products and also a visibility on manufacturing costs going forward.
The overall feel from an indirect tax standpoint is that one has to have the appetite of using more working capital with the introduction of "Social Welfare Surcharge" replacing the erstwhile education cess and secondary and higher education cess, which would now be levied at 10 per cent on the aggregate duties of customs. So, effectively an incremental 7 per cent vis-a-vis the erstwhile cesses at 3 per cent. Also, this would be an additional cost as credit is not available of this surcharge paid.
With the impetus on Make in India, green energy has been a drive wherein customs duty has been withdrawn on Solar Tempered Glass for manufacturing solar panels. This would encourage the local manufacturers as withdrawal of customs duty would improvise the manufacturing cost.
In-parallel, the Director General of Safeguards has recently initiated measures on import of solar panels attracting safeguard duty of approximately 70 per cent ad valorem. Both the factors would be a double safeguard for the local manufacturers to boost green energy. An another important step for promoting Make in India is by increasing the customs duty rates on inter-alia footwear, imitation jewelry, cellular mobile phones and furniture."
An important move of reducing litigation under customs is of prudence, as the pending matters under adjudication were plenty. Step for conducting these adjudications under a time bound frame-work is of significance. There wasn’t enough room for the Finance Minister to showcase much on indirect taxes, however he drove his way to get the “Make in India” flag flying high.
Amar Kaul, Chairman and Managing Director, Ingersoll Rand (India) Limited: The Union Budget 2018 is a comprehensive Budget covering wide base of innovation and sustainability. The Budget proposals to increase spends in rural areas, agriculture, infrastructure and major thrust on social sectors like health and education should provide a growth impetus to the Indian economy and demand generation. Major emphasis on skill development, housing for all, railway infrastructure, smart cities, food processing sector, agricultural market, science and technology and textile is a welcome move that will boost the capital goods segment. It will be interesting to see how the financial mechanism works.
Mr. Jay Chen, CEO, Huawei Telecommunications India: We applaud the forward looking Union Budget 2018 where the government is extensively focusing on digitalisation with further support to initiatives like Digital India, Smart Cities, Swachh Bharat among others. The Union Budget laid down plans to connect additional 1.5 lakh gram panchayats with fibre optic networks under the BharatNet. This will create access and affordability and will help in bridging the digital divide even further.
The Union Budget 2018 will further strengthen India’s journey towards Digital Transformation and reinforces the foundation to help us in building intelligent networks and reshaping the world.
Ravi Mehta, Partner, Grant Thornton India LLP: This Budget largely leaves the M&A space ‘as is’ qua any material relief, except for an averment to bring reforms in the stamp duty regime for financial securities transactions, and leaves hope for the companies under Insolvency & Bankruptcy Code (IBC) to continue with tax losses subject to the approval of resolution plan. In line with the earlier announcement, the Finance Bill also proposes an amendment to allow MAT relief to IBC companies for their ‘book losses’. However, the Return on Equity of Private Equity/VC/Financial Investors undertaking Private Investments in Public Equity (PIPE) deals using the block/bulk deal window of the stock exchange is impacted with the proposed introduction of 10 per cent Long Term Capital Gains Tax on Listed Equity.
O P Jagati, Sr. VP (Finance) & Company Secretary, Fowler Westrup: Finance Minister Arun Jaitley deserves compliment for pro-rural, farmers friendly and social welfare proposals. However, he has not spelt his plan of action for infusing adequate funds in the banking sector. Directing the big corporates to source 25 per cent of funds requirement through bond market seems to be over ambitious as bond market is not so advanced in India at least among individual investors. Rather to start with, he could have offered a few incentives in the form of income tax rebate for individuals for subscribing to corporate bonds. Budget allocation of Rs 3,794 crore for MSME sector is not adequate by any parameter. It is high time for reform in the land acquisition and labour legislations. However, FM has avoided them, presumably, in context of political compulsion.
Shailja Dutt, Chairperson & Global Managing Director, Stellar Search: At a personal level, on my wish list as an SME and taking my pre–budget expectations into account, I was of the view that we needed a Budget where there would be rationalised tax slabs for companies in the below Rs 100 crore bracket. The respite comes with the declaration in reduction of corporate tax to 25 per cent for companies with revenue up to Rs 250 crore.
However, at a larger level if the Budget is an indication of intent, then on that front the current government has made its stance clear. They will play to the vote bank. I do appreciate the 'intent' to provide universal healthcare, the interest in the ‘bottom of the pyramid’, the pro - kisaan outcomes but what about the aam insaan (common man)? Bereft of any benefit for the salaried middle class, the push for long term capital gains further highlights the skewed intent in favour of the vote bank.
From a pre- election perspective, I would say the Budget is balanced, but will it foster economic growth is still under debate.
Vikas Vasal, Partner & National Tax Leader, Grant Thornton India LLP: In Union Budget 2018-19, the focus is on boosting growth and employment through intervention and support to agriculture, infrastructure & rural development. On the tax front, the government had a tough task at hand to meet demands of different stakeholders and to contain fiscal deficit.
Accordingly, a more pragmatic approach has been adopted by providing some tax relief to salaried tax payers, senior citizens, and small and medium enterprises (SME). Also, the government has taken a bold decision by introducing long term capital gains on listed securities as a measure to boost revenues, as against the popular demand of maintaining a status quo.
Sanjay Swamy, Managing Partner, Prime Venture Partners: SMEs and consumers have a massive credit gap - digitisation & collaboration between government, PSU, Private Sector and Startup ecosystem is key - and am glad to see specific initiatives address these aspects.
The government should do more to encourage fintech/startup ecosystem - and one of the most important ways is to by becoming an early adopter of these solutions.
Vinay Bagri, CEO and Co-Founder, NiYO: It's a very good Budget directionally for the salaried class. The introduction of standard deduction and rationalisation of medical benefits are commendable steps towards making all interaction between employee and employee digital.
Sachin Gupta, CEO and Co-Founder, HackerEarth: The Budget’s focus on healthcare and agriculture indicates that it’s largely structured to benefit the rural economy. There are few initiatives that impact corporate India and even fewer aimed at startups. However, certain initiatives aimed at employment such as PF contribution by government and talent development through education grants are highly welcome.
There is a massive transformation that’s happening across industries primarily led through technologies like AI, IoT, Big Data and others. India has the unique opportunity to drive these innovations for business across the globe but it needs a concerted effort to create skilled talent. The move by the government to focus on these technologies through Digital India is appreciated.
Bala Parthasarathy, CEO and Co-Founder, MoneyTap: I believe that the 2018 Union Budget would have an overall positive impact on the FinTech and Financial Services sector. It is obviously a complex act to balance multiple factors such as our fiscal deficit targets (that stayed around 3.2 per cent this last year), GDP growth, unemployment rates boost to our manufacturing sector and all of this in the backdrop of balancing inflation and the recapitalisation of PSU banks. The government is giving a strong push to domestic manufacturing, especially with the 372 new business reforms for improving ease of business. This may also show a further rise on the consumption side. Both of these factors put together would facilitate a healthy retail credit growth. It’s possible that a lot of this credit growth may come from the private sector banks, which is a good thing as digital and technology adoption is higher with these banks.
Some smartphone prices may go up, but with the push on domestic manufacturing and ease of doing business, we may see more phone variations coming out in the market across price points. So, smartphone penetration will probably continue to see a rise and further help the various Fintech services (such as wallets, lending products, PFMs, etc.) that are built on smartphone apps and mobile protocol stacks.
The focus on cleaning up balance sheets of over-leveraged PSU banks and resolving NPAs should ease cash flow burdens of these institutions and is a good signal for enabling business growth. This should encourage higher adoption of cost efficient lending practices which is the strength of Fintechs in the lending space. So, Fintechs would benefit from this either as direct lending or increased collaboration with banks. On the flip side, the exchequer might also see some spending pressures.
As the GST adoption picks up and new initiatives around blockchain, ML and AI see R&D spends and adoption from the government, as Jaitley pointed out, technology will start playing an even bigger role in driving cost efficiencies and increasing revenue for BFSI and FinTech players.
It will be interesting to see how the whole cryptocurrency piece plays out as the government has a skeptical view of that.
Overall, I think the Budget is going to give a strong push to our economy in the right direction of technology adoption, higher ease of doing business, enabling consumption and credit growth and making us a more digital savvy society.
Anand Bhushan, Partner, Shardul Amarchand Mangaldas: Recognising the strategic change in technology world, Finance Minister emphasised on promoting growth of cutting edge technologies in digital space – machine learning, artificial intelligence, internet of things, 3D printing and the like.
To harness more research and adoption of these technologies, the government has increased the Budget allocation for foundational infrastructure to support these cutting edge technologies under the Digital India Programme and will launch a Mission on Cyber Physical Systems. The government will also take steps to promote the development and use of Fifth Generation (5G) technologies.
To settle the dust for once and all regarding the cryptocurrencies, particularly the Bitcoin, the Finance Minister announced that the Government of India does not recognise the non-fiat cryptocurrencies as legal tender.
However, the government will encourage the usage of distributed ledger system or the block chain technology which allows organisation of any chain of records or transactions without the need of intermediaries and this would also include the possible introduction of fiat cryptocurrency by Reserve Bank of India.
It is encouraging to see the government’s focus on promoting development and use of the cutting edge technologies, which will not only impact the economy but facilitate everyday life for its citizens. At the same faster pace, the government needs to introduce or amend the laws to regulate the usage of these technologies. With this, we expect the passage of Data Privacy Bill soon.
Shailendra Naidu, CEO, OBOPAY: The government’s decision to encourage blockchain in payments sector is a welcome measure. The decentralised technology will help simplify the ecosystem, mitigate security concerns and build a trustworthy network ensuring data integrity. Elimination of intermediaries and overhead costs will help in reduction of transaction costs. The ability to make data transfer simpler and easier between entities would encourage adoption of blockchain as a preferred technology across industries. Blockchain with strong support from the government would help reshape the way businesses transact and fuel the digital initiatives.
Sashank Rishyasringa, Co-Founder of Capital Float: The finance ministry has demonstrated incredible foresight. We appreciate that the finance ministry acknowledged the importance of digital lenders like Capital Float in aiding the growth of the MSME sector. As founding members of The Digital Lenders Association of India (DLAI), we met with the finance ministry, along with other leading Fintech lenders, last year and presented a whitepaper with recommendations to foster Fintech lending. We’re delighted to see those suggestions being incorporated in spirit and in letter. These include increased capital injection into the MUDRA Yojna up to Rs 3 lakh crores and doubling the allocation to the Digital India initiative. In addition, our request to access funds from MUDRA is also being considered by the ministry, as they are reviewing the refinancing policy and eligibility criteria for NBFCs. We also welcome Jaitley’s forward-looking approach towards adopting blockchain, which will play a crucial role in shaping digital payments in the country.
Gaurav Hinduja, Co-Founder of Capital Float: The government and the finance ministry continues to identify the MSME sector as being critical towards increasing GDP & employment. The recapitalisation of the PSU banks up to Rs 5 lakh crore and allocation of Rs 3 lakh crore in MUDRA loans ensures a higher availability of formal finance for credit-starved MSME segments. Another huge step towards boosting the growth prospects of MSMEs is the reduction of corporate tax to 25 per cent for enterprises with a turnover of up to Rs 250 crore. The development of unique identities along the lines of Aadhaar for individual enterprises will enable us to further our efforts towards financial inclusion, as we can extend digital credit services to MSMEs with little to no documentation. The extension of Kisan Credit Card to fisheries and animal husbandry farmers and the allocation of Rs 10,000 crore for fisheries and aquaculture, animal husbandry funds further adds to the government’s efforts towards absorbing more segments into the formal financial ecosystem.