What business leaders think of Budget 2018?
As the fineprints of the Union Budget 2018 reaches the investor community, market witnesses extreme reactions to the budgetary announcements, ranging from fantastic, good to outright bad. Here are a few reactions from the key stakeholders representing the various sector of the Indian economy.
“The Finance Minister has rolled out an excellent budget with a thrust to core areas such as agriculture, healthcare, education infrastructure and rural development. The overall focus is to support farmers and rural areas, fine print focuses on boosting growth, jobs and private investment. This is a positive budget, with a continued focus on fiscal prudence, boosting the manufacturing sector, augmenting MSME's, improving healthcare and skill development. The impetus to GIFT City IFSC, Gold Exchanges, Disinvestment, ETF's for debt financing and measures to reviving corporate bond markets augers well for the capital markets,” – Ashishkumar Chauhan, MD & CEO, BSE Limited.
“FM has followed the principle of nobellese oblige (privilege entails responsibility) by introducing the Long-Term Capital Gains tax of 10% on listed Equities. Those who have more – must pay more. By grandfathering gains until Jan 31, 2017, the FM has ensured that there is no short-term damage to the markets. The 10% tax on dividends declared by equity-oriented mutual funds is still lower than the 30% tax on dividends by debt and liquid funds. However, this will reduce the mis-selling of Balanced Funds (holding > 65% equities) that declare a monthly dividend out of equity gains, but are misrepresented as ‘income’ products,” – Kunal Bajaj, CEO & Founder, Clearfunds.com.
“Rationalisation of LTCG as expected has arrived, though negative on sentiments, but robust equity returns will absorb this 10%, if corporate earnings growth happen as expected,” – Kamlesh Rao, MD & CEO, Kotak Securities
“Union Budget 2018 is a mix for SME's. Increased Wi-Fi connectivity across connects penetration of rural markets which is a good sign. Standard deduction of Rs 40,000 will actually reduce paperwork for companies, eliminates need for fraudulent claims and expands reach to non-salaried class as well. Budget also talked about government financing EPF contribution for new employees. This will reduce manpower costs SMBs who are in the growth mode and who normally employ first-time job seekers. Increased airport outlay talked will hugely solve connectivity issues which will, in turn, be very beneficial for the SMB and SME's. First reaction, the Finance team has tried to do a lot for the poor and the MSME by allocating big funds to schemes like the health schemes, the mudra loan schemes, the agriculture schemes, however, what is going to be important is the execution. Doubling of outlay to the mudra scheme, along with easing of complex requirements for availing the loan should go a long way in boosting the startups and SMBs growth story,” – Sunita Maheswari, Co-Founder, StartUp Arena
“The government’s announcement that it will formulate a comprehensive gold policy to establish gold as an asset-class is ground-breaking. The establishment of regulated gold exchanges is exceptionally positive towards making gold a mainstream national value-added asset. A stable policy environment and a fair and effective trading market will bring much-needed transparency and stability,” –Somasundaram PR, MD - India, World Gold Council
“The Union Budget 2018 was very important since the challenge faced was to address political compulsions. There was a need to restore macroeconomic stability with increasing inflation, crude Oil prices, CAD and fiscal deficit under pressure while focusing on growth and address the stress on rural and farm sectors. The FM has been able to address the stress in rural and farm sectors by making enough allocations and also taking structural decisions like making minimum support prices as 1.5 times the cost of production. The health insurance scheme of Rs. 5 lakh cover per family for 10 crore families, focus on education, infrastructure, housing and senior citizens in particular are steps to bridge the urban-rural as well as the rich-poor divide in the country.
From a market perspective, the fiscal deficit number for FY18 at 3.5% was a bit higher than expected while the target of 3.3% for FY19 is on expected line of some consolidation over FY18. LTCG tax at 10% as also a distribution tax on equity mutual funds is negative at the margin, but the grandfathering of gains up to January 31, 2018 is a good measure to ensure no panic sales are done to realize gains. The equity markets will now move back its focus on earnings, which are expected to be in mid-teens for FY19 and FY20. It will have to gauge the impact of flows in domestic markets due to change in LTCG while FII’s will continue to allocate. Debt markets over the next year will face the brunt of macro deterioration at a margin compared to FY18,” – Sudhakar Shanbhag, CIO, Kotak Mahindra Life Insurance.
As expected, the budget turned out to be populist and sounded excessively cautious while the need of the hour was to provide a positive boost to the economy. The Budget did not offer any substantial incentives to individual taxpayers, with slabs remaining constant. A change in the standard tax deduction was the only gift to the salaried class. There was no change in tax savings on home loans, nor were the 80C limits raised.
While there were some notable announcements with positive implications for the real estate sector including the push for affordable housing and addressing the anomaly under Section 43 CA to tax real estate transactions at their real value rather than the value arrived at by applying artificially higher circle rates. As per new announcement, if the circle rate does not exceed 5% of transaction value, no adjustment is required towards the capital gains on a real estate transaction. It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates. Cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement,” – Anuj Puri, Chairman, ANAROCK Property Consultants.
“The Union budget, in its truest sense, is a prospective budget with the fairest treatment given to taxation. This is especially for the long-term capital gains tax wherein all the gains will taxed prospectively with January 31, 2018 as the base cost structure. This will augment the image of India in the international community which hitherto was dubbed as retro tax country,” – Jimeet Modi, CEO, Samco Securities.
"The Government did what it thought necessary to boost revenue, revive growth and get election-ready. A number of initiatives to boost the agricultural sector will benefit the economy over the long term and these are coming without much sops. For wealth managers, dealing with tax risks and the complexities associated with them are what make a difference. The knee-jerk reaction of the market on the announcement of LTCG tax will be short-lived, if any. With the buoyancy in equity markets, grand-fathering of gains on existing equity investments and incessant domestic savings flow, investors will be quick to adjust to the new normal. If the Finance Minister manages to keep deficit as projected at 3.3pc of GDP and implement the development measures announced in this budget, I am sure India will remain an attractive destination for investments for a long time to come,” – Anirudha Taparia, Executive Director, IIFL Investment Managers.
“Overall the reduction in corporate tax rate to 25% for SME companies having topline of Rs. 250 crore is positive and in-line with the government’s view to reduce corporate tax rate to 25%. As for the Long term capital gain tax of 10% on income exceeding Rs. 1,00,000, the markets were anticipating this and we treat it negative for equity investments. No change in personal income tax slab is negative. The markets were expecting some changes in personal tax rates, and hence benefit to the salaried class. Overall the budget is slightly negative as per me,” – Pankaj Karde, Systematix Shares