Union Budget Outlook For Investors

Speculations and discussions are on across the length and breadth of the country as the crucial union budget day approaches. Finance Minister has already indicated the 2016 budget will be anything but ‘populist.’ How will this budget be from the investors’ and markets’ perspective—Deputy Editor, Amit Bhanot slogs hard for DSIJ reader-investors and sniffs around North Block to bring this piece.

As we consider the global economic scenario and happenings around us, undoubtedly we find ourselves passing through one of the toughest phases in the last two decades. To worsen it, situation in China does not send a good vibe and dampen the spirit of Indian economy, right now in the hands of a majority government in power which though has been struggling with the lacuna of not enjoying majority in the Upper House of Parliament. Important Bills are stuck in Parliament logjam, key decisions which were expected to be cleared long back remain pending, politics has been showing its ugly teeth and nails over and above national interest. Worst, the markets are behaving beyond anyone’s guess. Exports have shown decline for 13 months in a row indicating longer than assumed global slowdown. Index Industrial Production (IIP) data released in last November reveals sharpest decline in last four years while posting a negative 3.2 per cent decline. Rupee continues to tumble and presently is at a marginal distance from its all-time low recording an indicator of Rs 68.85/USD in August 2013.

All these incidents are really sending shivers down the spine of economists, investors, industrialists, policy makers and common man alike and are waiting for some kind of silver lining amid dark clouds. Indian bourses at present seem to be in a tight spot as slightest bad news is now creating good amount of unwanted volatility. In such a situation all are in search of some positive trigger that can re-establish the ‘sweet spot’ status of India. In February, the union budget month investors naturally have been eagerly awaiting some twists and turns inscribed on those thousands of typed documents emerging from Finance Ministry to bring back their spirits when it comes to markets and investing.

When DSIJ deep dived into the thought process of the union government in tackling the gigantic problems related to the economy, we found that government is quite on the task to take situation head on and arrangements are being made to anyhow save India from this global economic thunderstorm.

*Fiscal consolidation alongwith growth

Finance Minister Arun Jaitley clearly knows the importance of fiscal discipline at the present juncture. When we enquired about any kind of ‘adventurism’ by the government in the upcoming budget in favour of growth, response in the corridors of power in the national capital was quite negative. “At the current juncture we can’t afford to leave our fiscal deficit unnoticed and FM would certainly want to keep fiscal deficit tight and for the current fiscal we are right on track as we can achieve the fiscal deficit target of 3.9% of GDP during FY16 and next year target too government wants to continue with its earlier target of 3.5% during FY17,” whispered a finance ministry official. FM himself has reiterated about the fiscal consolidation recently and fortunately for him, led by indirect taxes spurt, there is a buoyant 20% plus growth in the taxes during FY16 and import bill is all time low due to cheaper crude. Increasing excise on petroleum products is also helping government to keep a balance between growth spending and keeping fiscal deficit under check.

Government has initiated various investment schemes into infrastructure, power, financial sectors and is quite bullish about the real impact of these initiatives on ground. “Some industries like automobiles, consumer durables etc. are already showing green shoots of growth but it is too early to say anything. We have to keep in mind only growth potential can save the day for us,” quips ministry official. Ministry is predicting 7.2% growth during first half of FY17 and for this various provisions would be there in the budget that will give some vital assistance to some key sectors like manufacturing centric infrastructure, automobile, new and renewable power, IT hardware, etc.

IT sector will get boost

Various key initiatives launched by Prime Minister Narendra Modi, like Digital India, Skill India, Make in India, Startup India are mainly dependent upon information technology (IT) sector’s growth and government is quite banking upon this space for the overall industrial growth. In fact government has already included IT into the list of key sectors for pushing ‘Make in India’ programme and IT sector will surely be in the focus for budget. Interestingly, it is not software but the hardware segment that has caught the eyeballs of the policy makers and key announcements could be made for its progress in the budget as it can push Indian manufacturing to next level. FM may incentivise mobile and tablets manufacturers by giving some kind of duty differential benefits, we learn.  

On the software part, though IT sector is pushing for deferring of recently announced provisions of Place of Effective Management (POEM) by CBDT by a couple of years, government seems quiet decisive about implementing it so that more transparency can be brought into the tax management process. Sources in the government told DSIJ that provision of POEM can be rationalised and its scope would be expanded further to include overseas companies. Importantly IT sector is demanding the extension of sunset clause for tax relief to SEZ companies till March 2019, it seems quite unlikely that FM would address that demand, though some kind of relief can be given by reduction of Minimum Alternate Tax (MAT) or increasing its utilisation period.

Booster dose for banking and financial sector

Government seems quite committed towards the growth and restructuring of banking and financial system of the country and the FM may make some big bang announcement in the budget. Sources at the ministry shared with DSIJ that there is quite a good possibility that deduction under 80C may be increased to increase saving habits of the citizens and also helping the financial sector of the country. Government is also seriously thinking about the long term demand of banks to allow them to issue off-shore INR bonds just like domestic infra bonds. This will cater to infrastructure requirements of the country. FM is quite serious about the present state of condition of the banks’ non-performing assets and some kind of exposure could come in his budget announcement, where mechanism to know real level of NPAs of the banks may be instituted. Sources in the finance ministry suggest that government wants to do crackdown on the industrial wilful defaulters and some provisions may be announced in the budget.

As per sources, there can be key announcements related to insurance sector as government wants to break the ice by allowing the listing of PSU non-life insurance companies. Also as New Crop Insurance Scheme has already been announced, it should be made more comprehensive and should be assisted with technology interface 

Government is also moving ahead with its stance of increasing public spending into infrastructure, railways, roads, power projects etc. This will be quite helpful for the financial sector and would really help to start the investment cycle in the country. On the consumption part, steps to incentivise cash less transactions may be announced in the budget.

Rationalisation of tax structure on cards but no cuts expected Focus of the government is to really bring rationale into tax structure and with PM’s conviction of bringing ease of doing business, we may see some major steps being taken by FM in the budget rationalise tax mechanism and bringing down cost and hassles of doing business. Though corporates are pushing for bringing down corporate tax, FM may introduce a tax structure overhauling by bringing various provisions like widening the tax slab, bringing e-governance into tax regime to give automated response in terms of refunds, order, adjudication and also taking emails as formal communication. It will remove the hassles faced by tax payer. “Government is also planning to bring in citizen charter for the direct and indirect tax structure, where a timeline would be fixed for each activity and announcement for this may be there in the budget,” quipped a finance ministry source.

At the same time though there are demands from all the corners to increase tax free income slab, this is quite unlikely that this demand would be met considering the negative growth in direct taxes but deduction for investments (80C) and saving may be increase. Also lower rate of crude has actually saved the day for government, otherwise it could have been a disaster on fiscal management front as revenue is declining on sustainable basis.

On the other hand, government is also planning to relook at the petroleum and fertiliser subsidy and like in LPG subsidy, direct benefit transfer regime may come in the fertiliser space. Announcement in this concern could be made in the budget. Government is also planning to increase its revenue via disinvestment and as last fiscal’s target of Rs 69,500 crore is nowhere in sight and due to bleak markets government has till now mopped up just Rs. 12700 crore till now. Department of disinvestment has given some suggestions to the government about the ways to increase the revenue from this space and in this a well laid out strategy to sell stake in small chunks throughout the year is one of them. Stake sale via PSU ETF is also on the cards and second phase of this sale may come in the first half as DOD has already made arrangements but waiting for the markets to become conducive. Considering the volatility in the markets next year disinvestment target would be quite low and it would be around FY14’s target of around Rs 35-36000 crore and government has to look upon various other sources of revenue.

Anti dumping measures for sure

Considering the drastic fall in Yuan and unprecedented slowdown in China, dumping threat has considerably risen for the domestic industries especially steel, aluminium, copper, IT hardware, capital goods, consumer durables, construction equipment, manufacturing sector specific products. China has already started channelising various products at throwaway prices to India, threatening the existence of domestic manufacturers are industries. Government is keeping a tap on this situation and anti-dumping duties may come thick and heavy in the budget. “Products that are mainly related to MSME sector as well as sector that have potential for Make in India would surely get some kind of protection in the budget as China problem is quite significant,” voiced a ministry official requesting anonymity.

Social sector spending would get a boost

FM is actually walking on a tight rope as pressures are coming from all quarters to increase the social sector spending. On the priority list, children, women and senior citizens figure quite high and budget would increase provisions for social schemes involving old age pension, Rashtriya Swasthaya Bima Yojana (RSBY) funds to implement Right to Education (RTE) Act 2009, improving health services and secondary and higher education. A lot of political pressure is coming considering condition of the farmers in the country so apart from interest subvention on agriculture loans, there may be some announcement regarding loan waiver in some distressed areas. Government may even increase the scope of crop insurance scheme to include more and more farmers.  

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Focus of government to continue on infra, irrigation

The Finance Minister also emphasised on investments in the areas of weakness while ruling out much impact on India due to recent global meltdown//intro

“Only when you grow at that pace you can get rid of poverty," believes union finance minister, Arun Jaitley remarked.  He minces no words while indicating a budget which would certainly focus on structural reforms helping the economy so that the country can sustain 8-9 per cent growth.  “If Budget goes for sheer populism, it is not necessary that it will serve the cause of economics or even politics,” Jaitley categorically remarked at an event organised by a media house in New Delhi during last week of January. “Economy has to be on sounder platform. We have to weigh the area of weakness, where investments are required, I have to pitch in that direction. Focus of government would continue into infrastructure, irrigation and farm productivity,” he added.

FM was quite reluctant to take side on the ongoing debate about fiscal consolidation versus growth agenda pushing economy. He said that there are arguments in favour of keeping the public spending tap open as well sticking to fiscal deficit targets thereby building credibility of governance. “In a dynamic situation government has the mandate to decide as there is also an opinion not to constrain the government by targets,” he commented. Talking at length about present state of global economy, the finance minister said that global economy is doing badly due to the slump in the commodity and oil prices but this slump suits India as India is not the net buyers of these (commodities).

Reassuring the Investors

Reiterating the government’s stand of not to put any retrospective tax claims, FM said that government wouldn’t pursue these claims and he would like to see tax disputes involving 2-3 cases to get resolved as expeditiously as possible. “I think payable taxes must be collected but there must not be unfair taxes as they bring bad name for the country and no revenue,” he added.

When asked about his opinion about subsidy, Jaitley said that the government is in favour of rationalisation of subsidies, not their abolition. Elaborating the stand of his government Jaitley said that the cabinet was not against the concept of subsidies as with more than a fourth of Indians living below the poverty line, these need to be directed toward making food supplies available to the poor and supporting the stressed farm sector. He said that benefits of subsidy must be targeted towards the needy but it shouldn’t mean to give unequal preference.

Hopeful for the GST

Jaitley sounded quite diplomatic while talking about much awaited Goods and Service Tax (GST). He has even given the whole credit of GST to UPA and said that it is an important reform of UPA and he has to give credit to them for the same. “I have reached out to Congress and hopeful that they will see rationale behind passing GST. UPA allies like the RJD, NCP and JDU are all supporting the crucial reform,” Jaitley said. “I don’t know why they (Congress) have a rethink on GST. We can't bound future generations to a flawed legislation," the FM added.

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PM bats for ‘good subsidies’

Importantly in his key note address at the same programme Prime Minister Narendra Modi specifically batted for ‘good subsidies’ and eliminating bad subsides. “We have to be pragmatic. We have to eliminate bad subsidies, but some subsidies may be necessary to protect the poor and the needy and give them a fair chance to succeed. Hence my aim is not to eliminate subsidies but to rationalize and target them,” PM said regarding the subsidy. He even gave a new concept to rename farm subsidy as ‘incentive for agricultural production’ so that it will be treated akin with industrial incentives.

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FM bats for infra

“If Budget goes for sheer populism, it is not necessary that it will serve the cause of economics or even politics. Economy has to be on sounder platform. We have to weigh the area of weakness, where investments are required, I have to pitch in that direction. Focus of government would continue into infrastructure, irrigation and farm productivity,” FM said
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“Turnaround is bound to happen, so no reason to worry,” SBI chief

She is the chairperson of India’s largest PSU bank and has been associated with brand SBI since 1977. A graduate of Jadavpur University, Arundhati Bhattacharya in an exclusive interaction with Executive Editor of DSIJ, Joydeep R Ray claims the worst is almost over and things are going to be right from here.

Q. What are your expectations from the upcoming budget? How is the government expected to strengthen position of the banking industry in the country?

A. Looking to the current economic need of putting the economy back on the growth path, we expect that the upcoming budget would focus on economic and structural reforms, rationalisation of subsidies and not populist reform. Getting the balance right between government investment expenditure and maintaining fiscal prudence will be the key for union budget 2016.

As regards the banking sector, it has already been stated by the government that they will continue to provide capital support and expect the budget to build on this commitment. The proposal about the bankruptcy law will also go a long way in addressing concerns of the industry on NPA management and resolution.

Q. People’s spending power is going to increase further, even with the new pay commission recommendations. This may lead to further demand for retail loans. How your bank is planning to aggressively tap this opportunity?

A. India being a consumption driven economy and rise in disposable incomes augur well for demand driven sectors like consumer durables, housing and auto. Retail is our forte and our products are geared towards providing best value to our customers and we see no difficulty in meeting a higher demand.

Q. Indian banking industry is struggling with the menace of                non-performing assets (NPAs). Most of the public sector banks       are sitting on bad loans. Will you give us idea how bad loans are affecting the sector and also may be confidence of the retail investors?

A. NPAs in banks are a result of many factors, the principal one being the downturn in the economy, both domestic and global. Some sectors like textile, aviation, iron and steel, transportation and construction have been impacted more. However, I feel that the worst is over and with the uptick in the economy, we shall see a turnaround. In any case, all NPAs are well provided for and multi directional efforts from the banking system, the regulators and government are on to mitigate the stress. For instance, the Uday Package for discoms and package for steel sector etc. are important measures in this direction.

Q. Can you throw some light on implementation of GST in near term. How will it, once implemented, impact overall Indian economy?

 A. The GST Bill is considered a major reformatory step for Indian taxation system. It is expected that with GST implementation, the cascading of taxes would be reduced reasonably. Overall it would benefit Indian economy in long run with a simplified, more transparent and easily manageable tax structure.

Q.  Being the largest PSU bank, when do you think the bad loans episode will end and upside in banking sector will be witnessed? What are the steps being recently taken by SBI to ensure further lessened NPA?

As stated earlier, I feel that the NPA story has not bottomed out and we are on our way out of the trough. There could be some sub sectors, where the recovery may be slightly prolonged but overall the pick up in economy will hasten the process. In any case, in most of the large NPAs, real assets have been created on the ground. Banks are also complying with the stringent provisioning norms. At SBI, we have put in a place a strong monitoring mechanism and set up an Early Warning System for timely corrective action. We are focusing on risk mitigated products and risk scoring models that will provide a healthier portfolio. An MD Credit & Risk position has been created for a more focused approach for effective asset control.

Q. How your digital banking and payment bank segments are performing? What are future prospect for the same?

A. The digital banking segment is doing well, and as per expectations. There are about 19 sbiINTOUCH outlets of SBI, which are 24x7 in nature. SBI also plans to ramp digital outlets up to 100 by March 2016. Most of our offerings and services are now on the digital platform and our mobile and internet banking is leading the pack. The Bank has tied up with e-Commerce players for financing their vendors and the entire sanctioning process is fully automated. We have recently opened a branch in Bengaluru dedicated to start ups. The payment bank in partnership with Reliance is still in the construction and various ends and formalities are being tied up. We see a lot of value in this venture.

Q. What are SBI’s strategies for expanding its business in retail    banking in near term?

A. Retail banking is a focus area and we continue to be market leaders in the housing and auto segment. We have considerably improved our delivery platform and turnaround time. Retail loans can be applied for and obtained online. We will continue to expand our retail business.

Q. Private sector banks are very firm on being technology driven. SBI even being a PSU bank has taken lead to be one of the banks having tech-dependant operations for its customers. Can you throw some light on, the bank is working on new technology driven strategies in future for its customers? How tech is going to help banking for SBI customers in near future?

A. Digital disruption is all around us and I am proud to say the SBI has led from front in making its mark in applying cutting edge technology to its processes. Our sbiINTOUCH brand is novel and perhaps unique in Asia.   SBI has largest base of internet banking and mobile banking users in the country, which is leadership position with other banks. The recent tie-ups with Amazon and Paypal will facilitate payments which in turn will increase commerce in future. It has been our endeavour to provide immersive omni channel experience to our valued customers with 24X7 ease and convenience at their finger tips.

Q. Investors’ wealth has reduced about 45 per cent after the Bank’s stock was split. The Bank’s share price is touching its 52- week low almost every day, shareholders are worried nowadays.  Can you put few words to them here so that they are less worried?

A. SBI’s balancesheet strength and its position in India is incomparable and unquestionable. The reposed in us by our customers and investor community is encouraging us to continuously improve ourselves. Share prices across bourses and sector are seeing volatility and SBI cannot be singled out. Turnaround is bound to happen and I assure our stake holders that they have nothing to worry about.

Q. Understand SBI is witnessing flourish in home loans segment, in fact it is coming as a silver lining for the Bank. How are you planning to further emphasis on this segment? Also are the existing provisions under Securitisation Act enough to recover dues and handle NPAs in home loan segment.

A. SBI always tries to ease customers’ banking experiences by providing new schemes to widen its presence. Bank has recently launched 'FlexiPay' home loan which provides easy repayment terms and lessens EMI burden in initial period of loan.

(additional inputs by Lohit Bharambe)
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India takes pride toady as the country with world’s second largest road network. Cognizant of the need of catering of over 80 % of country’s passenger traffic and 60% of the good’s movement, Government of India has sent up an ambitious yet achievable target of building 30 Kms of roads per day.

Policy easing – The game changer

Road Sector in India has been stagnant for some time with deterred investor sentiments. Projects have been stalled over land acquisition and other regulatory/clearance issues leading to negative investor sentiments and cautious lenders.  With the Government’s recent initiatives, of the stalled projects 3.8 lakh crores, only 19 projects worth 16,100 Cr are under negotiation with Ministry. Bridging the developmental gap since 2012-14 during which only 5100 Km of road projects were awarded, the current governments intends to award 10,000 kms of road in current year.

Amid all, it is encouraging to note road sector being axis of Government’s economic policy including path breaking policy announcements like delay compensation, extension of concession periods for reasons not attributable to concessionaries  , one time fund infusion in stalled projects and permitting equity divestments in the operational BOT projects. An important note in this regard will continue to be Authority and Lenders reaching consensus on the delay factors and the cost escalation of the project.  

Till July 2015, as many as 189 projects with a cost of Rs 1.80 lakh crore were stuck due to problems in land acquisition, delays in forest and environment clearances, non-transfer of defence land, and hurdles in rail over bridges. Ministry is laying a lot of emphasis on project preparation and ensuring land acquisition and statutory clearances are given to developers in time. It is pleasing to note that new projects to be awarded only post acquisition of 80% of project land which will ensure PCOD of the project post completion. A group of Infrastructure has also been created under chairmanship of Hon’ble Minister of RTH to address all regulatory clearance pertaining to Railway, Defence, MoEF etc.

Flexible PPP Model:

One of the important game changers has been regular policy changes to keep up the pace of development. In 2015, with BOT projects hitting road blocks, NHAI projects worth 22000 Cr were awarded on EPC basis. With policy easing and simplification of project structuring, GoI has yet again introduced innovative cost sharing hybrid annuity model much to the liking of investors. The cost sharing approach will not only revive the public private partnership but will also shield the investors from revenue/traffic risk. Over 40,000 Cr worth of road project are expected to be awarded on hybrid annuity model in the coming year.

Boosting investments

Permitting 100% equity divestments post 2 years of operations is expected to release ~ 4000 Cr to road developers which will further help sponsors to take up new projects. Equity divestments and hybrid annuity will also pave way for new set of investors preferring to operate on tolling- operate – transfer (TOT) mechanism.  India has already witnessed inclination of both Indian and foreign firms in purchase of operating road assets. Any favorable policy easing towards TOT will ease the Government of its annuity obligations and improve private participation in the sector.

India and Japan are working on proposal to launch Infrastructure Company to provide soft loans to Indian road projects with credit targets of US $ 30 Billion.

Banking to finance growth

Balance sheets of the banks have been hit largely due to delays rendering banks to take a cautious approach toward infrastructure lending. One tie funding support to stalled projects is a welcomed step with reservations over acceding first charge over assets to NHAI in lieu of the funding support.  The policy is indeed a constructive step, however sharing of receivables on pari passu basis and repayment of NHAI fund infusion to be coterminous with repayment period of senior debt will stop gap the mezzanine facility extended by NHAI. Another critical factor for the success of the policy would be RBI’s response over Ministry seeking onetime special dispensation from RBI so that the projects for which one time fund infusion is required are exempted from existing asset classification and provisioning norms. Another constructive step would be allow flexible structuring of the projects with long concession periods and standard account classification of projects delayed beyond concessionaire control.

Socio economic development

More than 90% of the country’s road network comprises of district and rural roads which form backbone of our socio- economic development. To ensure end mile connectivity and bring every village on road of development, dedicated road development programs with focused targets needs to be set up in every state. GoI has already laid a road map in front of the states with setting of NHDP, Bharatmala Pariyojna, Special Accelerated Road Development Programme in North East and Left Wing Extremism. GOI has also signed the agreement for third and last tranche of US $ 273 million loan, out of total US $ 800 Million loan agreement with Asian Development Bank (ADB) for constructing 6,000 km of all weather rural roads.

With stepped up budgetary support of US$1 Trillion reserved for infrastructure during 12^th Fifth Year Plan, the valuation of Indian road & bridges infrastructure is expected to touch US $19.2 Billion by 2017. Supplemented by strategic policy reforms, Indian road sector will continue to be a focus sector in India’s growth story.
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Let this budget help India be a destination for handset makers: Swipe Tele

Shripal Gandhi, Founder & CEO of Swipe Technologies believe with Chinese economy slowing down, all eyes are now on India and an industry-friendly budget can honour the world’s expectations from our country. //intro

 

The telecom sector, more so, the handset segment is going through churn. This is acutely felt by start-ups and Swipe is feeling the churn on a daily basis. It is under this backdrop that the upcoming budget will be eagerly waited with baited breath by one and all.

 

My expectations are threefold:

 

Growth: 

 

With Chinese economy slowing down and international financial agencies predicting India to be the fastest growing large economy, all eyes are on India and these expectations will be realised only if the Finance Minister presents a budget that is focused at maintaining the growth while addressing the government’s social obligations. As a start-up in the telecommunications sector, we are looking at the forthcoming budget with lot of expectations. We expect the Finance Minister to look into the concerns of the start-up community and allocate additional resources to address those in order to ensure healthy growth of the entrepreneurship in the country.

Tax Benefits: 

To support the entrepreneurial spirit of India, the government recently announced the Startup India campaign that is based on an action plan aimed at promoting bank financing for start-up ventures. We are looking forward to clarity and additional incentives for the start-up community in the forthcoming budget. A tax and regulatory friendly environment created through the Start-Up India initiative will bring in new investments in India. It will be worthwhile to watch out for these incentives becoming a part of the Act, in the coming budget.

Labor Reforms & Manufacturing Boost: 

India is in a sweet-spot as far as manufacturing is concerned. With rising labour costs strength of its currency, China is losing its edge as the manufacturing hub of the world. On the other hand, with competitive labour costs and weak currency, India is ideally placed to take up the role of manufacturing hub of the world. We would expect the government to announce labor reforms and the relevant policy measures for the manufacturing sector so that India can leverage its competitive advantages of low-cost labour and a weak currency.

While the Government’s intent is clear with the “Make in India” initiative, the domestic manufacturing can be further incentivized with tax breaks. More funds must be allocated in the development of infrastructure which is critical for manufacturing. Investments in connectivity infrastructure like road, railways, ports, airports, etc. will be a clear positive. Land is also a critical factor for any manufacturing activity. Hence, the process of land acquisition should be made easier for entrepreneurs so that their ideas become real quickly. Subsidies on the cost of land and lower interest on loans will help the industry to keep the cost of production low enough for consumers to purchase their products.

 

GST: 

It is costly for manufacturers to deal with multi-tiered taxation structure and a homogenous taxation structure is expected. We are expecting some announcement and clarity on Goods and Services Tax that aims at replacing the indirect taxes levied by the Central and State governments on manufacturing, sale and consumption of goods and services throughout India.

In mobility space, currently, components are manufactured outside India, in places like China, Taiwan etc. and assembled in India. Locally-made components will help Indian manufactures of telecom products improve their margins and have better control on production and delivery schedules. Incentives in terms of tax holidays and subsidies for manufacturing of telecom components in India will certainly help players like Swipe Technologies.
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Indian Apparel Exports, Challenges & Issues: Hopes Ahead Of The Union Budget

 A close observer of textile and apparel industry, Dr Darlie Koshy believes a new scheme should be brought out especially for boosting productivity of apparel factories with better trained labour to strengthen this industry. Dr Koshy writes exclusively for DSIJ on this industry’s expectations from the union budget.

Indian merchandise exports have shrunk during the current year facing adverse Head Winds and have been on a free-fall.  Despite this the ‘Textile – Apparel’ exports have shown a silver lining in the clouds in very adverse market conditions. India’s readymade garment exports for the year 2014-15 was to the tune of US$ 16.85 billion which was up by 13.5 per cent in rupee terms. In the financial year 2015-16 April to November the increase has only been 2.5 per cent and in rupee terms, i.e. 9.2 per cent. The USA still remains the top most export destination registering 5.5 per cent growth. European Union 28 continues as the second most important destination for exports though EUs share in India’s RMG export has declined by 11.9 per cent. This shows that the Free-Trade-Agreement (FTA) much awaited if materialises soon could be a shot in the arm to boost apparel exports to EU.  The highest growth rate in India’s exports during 2015 has, strangely, been to UAE with 46 per cent and to South Africa – 48.4 per cent. China continues to be the dominant player with US $ 173.4 billion, almost 11 times that of India at US $ 16.54 billion and Bangladesh at US$ 27.59 billion, almost double of India. In terms of percentage share of world exports of RMG, India is the 7^th largest apparel exporter in the globe but it is way behind China, Bangladesh and Vietnam.   Cambodia’s market share is growing more than nine times faster.  In this background, what can apparel industry hope or press for in the union budget? 

India has remained primarily a ‘Cotton Garment Producer’ because of irrational duty structure of several MMF products and this makes it possible for garment exporters only to do business for 7-8 months and earn for 12 months!  If India has to become a leading player and ‘a round-the-year manufacturer’ this anomaly has to be addressed in the union budget.  Today Indian Apparel Exports have to practically remain idle for 4-5 months --- the entire revenue model is therefore skewed with less cushion for margins.  Also productivity is very low in Indian apparel industry. The new ATUFS or a new scheme should be brought out especially for boosting productivity of our factories with better trained labour. Technology, skill and innovation need to be promoted as a package for the sector ‘National Institute of Fashion Technology (NIFT)’ which was expected to catalyse the industry to those dimensions seem to have become a typical ‘sarkari’ outfit forgetting the key objective. If GST comes into effect the ‘Duty-draw back’, the main sustenance of Indian apparel exports, will have to go away.  For example, if the garment is getting 8 per cent duty drawback, 6 per cent is that of excise duty and if such a major support to the export Industry is taken away, it will break the back- bone of the apparel export industry.  Emergence of major trading blocs is beginning to affect seriously India’s competitiveness and comparative cost advantages.  Apparel industry has the potential for maximum employment generation, but employment linked incentivisation is missing and that could be a novel idea to encourage the industry to give a push to generate more employment in rural areas. “Apparel economy” could transform village economics as women and youth can find wage employment thus transforming their lives.  

“The Integrated Skill Development Scheme” (ISDS) needs to be completely revamped so that a progressive and advanced training system based on “world skill parameters” replace the existing entry level and other courses as textile-apparel value chain is now a part of a dynamic global industry.  It is important to recognize the increasing role of domestic apparel/retail industries in country’s economy.  China’s domestic apparel market is estimated at US$165 billion projected to reach by 2025 a size of 540 billion US $.  Moreover, China’s market for ‘clothing’ is continuously growing and the per-capita expenditure on clothing of urban households has grown in a decade by over 140 per cent as per reports available.  India’s per capita consumption of textile-apparel-garments’ taken as ‘clothing consumption’ has remained more-or-less stagnant, which is worrisome.  Multi-fibre strategy and fiber-neutrality, though much talked-about, have to telescope its effect with government support.  Consecutive budgets have over looked the importance of apparel industry and its impact on foreign exchange as well as wage-employment generation in rural areas.  MGNREGA and apparel industry can be well dovetailed with 100 days of wages to be given to the workforce in apparel industry through MGNREGA while the exporters/ manufacturers pay for the rest of 265 days through a “written agreement” with local authorities. Apparel is one of the most eco- friendly industries with minimum power consumption and can be promoted in the context of “SMART CITIES” as a “sustainable option”.  “Zero defect, Zero effect” is achievable in apparel industry with proper incentives which can help to increase the exports and Unit Value Realisation (UVR). This industry needs to attract more FDI to not only modernize the industry but also for making sure that technology and markets open up simultaneously (as it did for Sri Lanka/Vietnam etc.).  Indian garment exports have seen uneven ups and downs in the last five years on account of changing demand patterns, global economic uncertainties and sluggishness in the key markets.  There is a felt need to recognise the potential of this labour incentive industry practically present in most of the states which is especially suitable for Indian women and youth in villages and semi-urban areas.

 

(Dr. Darlie Koshy is Director General of ATDC & IAM and former Director of National Institute of Design (NID), Ahmedabad. The views expressed in this article are author’s personal views only)
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Let this budget enhance ease of doing business in India

Secretary-General of PHDCCI, Saurabh Sanyal pens this exclusive article for DSIJ while urging the government to take several pro-industry steps. We trust that the Union Budget 2016-17 will focus on enhancing ease of doing business along with creating a conducive tax environment for facilitating growth andinvestments in India. We would like to highlight the following for your consideration:

DIRECT TAXES

·         It is not tax rate but the number of tax payers which needs to be increased. If thereis Presumptive Tax upto Rs 10 crores turnover based on certain percentage of turnover such as provided in Section 44AD, it will increase efficiency, complianceand widening of tax base.

·         Mechanisms for alternate dispute resolution and redressal of grievances must be formulated and strengthened.

·         Clear guidelines are needed for e-commerce & start-ups to promote this sector

·         Appropriate grandfathering of exemption provisions needs to be undertaken including so that persons acting in context of those exemptions are not affected retro spectively or during part of the period of their claim

·         Specially designed incentives such as to infrastructure, and other such highest priority sectors would need to be monitored to promote infra, business investment and boost to the economy, employment and Make in India

·         Simple and unambiguous Transfer Price Policy to avoid unnecessary tax litigation which will encourage the foreign companies to come and invest in India. Allow the deductibility of CSR expenditure

·         Reduction as in corporate tax rates should also be given similarly in tax rate to LLP and Partnership firm, etc.

·         Comprehensive fair General Anti Avoidance Rules need to be framed appropriately.

·         MAT rates should be much reduced from current rate. Otherwise it results in doing away with exemption and deduction such as provided to priority sectors.

#   It is suggested to extend the date of depositing TDS by 10th of the following month

to enable the tax payers’ assessee to reconcile their account and deposit correct

amount in the Government Treasury to avoid filing of revised return.

·         The current provisions relating to contribution of superannuation funds results in

double taxation of same amount in the hands of employee and accordingly the

provisions of section 17(2) (vii) may be withdrawn from the statue to avoid

unnecessary hardship of double taxation to the employee.

·         Considering the sharp escalation in cost of medicines and medical treatment, it is

suggested that the limit of Medical expenses reimbursed by the employer are

exempted to the extent of Rs.50,000. This tax benefit should also be extended to

retired employees on medical reimbursements/hospitalization expenditure in

·         approved hospitals

INDIRECT TAXES

·         Time limit for adjudiction of Show Cause Notices issued by department - At present, no statutory time limit is prescribed under the law for adjudication of the show cause notices issued by the department. As a result, there are certain cases, where the showcause notices have not been adjudicated by the authorities for a number of years.

In furtherance of the objective of creating conducive regime for investment and encouraging continuing voluntary compliance by the Assessees, it is, therefore,suggested that a specific and statutory time limit may be prescribed for adjudication of the Show Cause Notices issued by the department forexpeditious settlement of the issues.

·          Clean Energy Cess - In the Union Budget 2010 the Hon’ble Finance Minister imposed levy of a Clean Energy Cess on purchase of coal and the same has been increased from Rs. 50 per MT in 2010 to Rs. 200 MT in Union Budget Feb 2015. It is suggested that levy of a clean energy cess on coal may be exempted for manufacturers who adopt clean technology and make best use of the green energy at considerable investment.

 

·          Strict timelines to be adhered for finalisation of audit and audit paras - At present, no time limit is prescribed under the law for issuance and settlement of Audit paras. Very often the audit paras are mechanically issued without considering the explanation offered by the assessee supported by the judicial

. Such Audit paras are culminating into Show Cause Notices leadingto avoidable unwarranted litigation. Therefore, there is a need to have a relook

at the Letter D.O.F. No. 232/127/2009-CX. 7, dated 13-10-2010 issued by the
Board that has led to a situation where the Commissioners refuse to drop the

 Paras drafted by the internal audit leave alone CERA audit teams and

showcause notices are issued.
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Budget should step up capital expenditure and implement tax reforms

Director General of CII, Chandrajit Banerjee, in this exclusive article for DSIJ feels the Budget should announce some bold measures to address the problem of non-performing assets (NPAs) in the banking system //intro

Even as the Indian economy is expected to be the world’s fastest growing economy, it is apparent that demand conditions remain subdued and the appetite for investments is below par. The Union Budget must therefore focus on measures to stimulate domestic demand, given that exports are likely to remain on a declining trend. CII has recommended that capital expenditure on key projects in sectors such as roads, railways, irrigation and power be increased substantially, either through higher budgetary allocation or through utilisation of PSUs’ surplus funds.

Public spending has the potential to ‘crowd in’ private investments at a time when private investors remain risk averse. Particular attention should be paid to measures to stimulate rural demand, which has been adversely impacted by two consecutive droughts. Rural demand needs to be supported not only through higher spending on rural infrastructure such as roads and irrigation but also through measures to enhance rural purchasing power. Rural inflation has been consistently higher than urban inflation and measures are needed to mitigate the impact on rural incomes.

The Budget should announce some bold measures to address the problem of non-performing assets (NPAs) in the banking system. As of September 2015, NPAs constituted over 5 per cent of banks’ total advances. The government should consider the creation of a National Asset Management Company (NAMCO) which would take NPAs off the bank’s balance sheet and also focus on rehabilitation, recapitalization and refinancing of banks. This would release capital, provide banks with lendable resources and restore the health of banks.

Higher spending by the government in productive areas should not compromise its plan for fiscal consolidation. Any extra spending needs to be compensated by measures to reduce the subsidy outgo, step up PSU disinvestment, and expand the tax base. The Pay Commission pay outs can be staggered so that the entire burden is not incurred in one year. There is a need to shift from cash-based to accrual-based budgeting as it leads to better outcomes. Ministries should prioritise their work so that they are able to spend the amount allocated to them in the Budget estimate.

The Finance Minister has announced the Government’s intention to implement critical tax reforms in both direct and indirect taxes. The reduction in the corporate tax rate together with rationalisation of incentives has the potential to transform the investment climate in India. CII has recommended that the government should announce a year-wise roadmap for reduction of corporate tax rate from 30% to 22%, along with the withdrawal of incentives in a calibrated manner. The phase-out of incentives should be prospective so that any investments made on the basis of these incentives should not be affected.

On indirect taxes, the implementation of GST will be a game-changing reform which will subsume all indirect taxes currently levied by the Centre, States and local bodies and eliminate cascading of taxes. Industry had been looking forward to its implementation from 1 April 2016 but has been disappointed by the non-passage of the Constitutional Amendment by Rajya Sabha in the winter session. The Budget should announce a revised roadmap for implementation of GST as well as reasonable tax rates. CII hopes that all political parties will support the Constitutional Amendment Bill in the Budget session, as the major concerns of the Opposition are being taken into account.

The Budget presentation by the Indian Finance Minister has become an occasion that is widely followed across the world for indications of the Government’s policy direction. The policy announcements made by the Finance Minister in the last two Budgets have brought in new ideas in several areas of economic policy. Industry is looking forward to more measures in the upcoming Budget that will facilitate investments and unlock India’s economic potential.
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Govt should bring in reforms early to protect interest of the investors

A graduate of University of Cambridge and a distinguished faculty of IIM-Ahmedabad, 39 years old Abhishek Mishra while handling vital departments of Uttar Pradesh government as a Minister, is also a keen observer of stock markets and Indian economy. In this interaction with DSIJ’s Poonam Singh, this management guru suggests investors to stay invested for long-term at this juncture rather than taking risks as a short-term player. Excerpts:

Q.   As a management expert associated with elite IIM and also a prominent political face, how do you find union finance minister’s recent remark that the upcoming budget would not be a ‘populist’ one?

A.    I also think it should not be a populist budget and I am happy that the FM has said that because what the country needs today is actually deep structural reports and it will be popular because it should be in the best of interests for people of India. The country needs financial discipline at this moment of crisis. As a management expert I feel the budget will not be a populist budget because that is not a need of the day, we have seen people being pampered by government during good times and for several months or years since the last 5 to 7 years and now as the economy has become more fragile, problems are in multiplications and so we like to see very serious decisions coming from Mr. Jaitley as he readies himself to table the most vital set of documents when it comes to the union of India.

 

Q.   The stock markets are looking very fragile. What kind of assurances the budget should have for investors?

A.    I think the investors attached with the markets at this moment will need to take a long term view. A market is always a reflection of the assessments of the future and basically a net present value of discounted cash flow value of future assessments, that’s what the markets say and in this context I think investors should be looking forward to stay invested for long term and not be in a short term mood-that is one message that I think for them. Once there are reforms by the government, I think investors will automatically have confidence that they and markets are on the right track and they can expect returns from the stock markets.

Q. How states like Uttar Pradesh should benefit from this Budget?

A.        You like to see definitely few things, incentives for the agriculture and the food processing industries that people very much like to see as we really need and another thing that I would as a minister for vocational education & skill development like to see is that some tax exemption or some provisions, people given some tax deduction for investment and also sops for the health sector. What I would like to see is if the FM can propose deduction in taxable income for the amount invested towards skilling sectors. If somebody is investing certain amount of money for their own skilling like mid job skilling, on the job skilling, whatever then that should also be eligible for some forms of tax deduction because then that acts as an incentive for people to go for training and skilling. So that is something that I as a minister vocational education & skill development like to see and if would be something that FM is intended to do, then that’s something that I really support.

Q.   Apart from infrastructure and agriculture sectors, what should be other focus areas to be covered in this budget?

A.    Another important focus area should include, is urban development.We need investment for making better air quality even. I think these are survival issues, these are life issues and it has to beyond political parties, opinion and beyond everything. The budget must have some provisions for a healthy life for the common people and all.

Q.   How this budget should boost ideas of Prime Minister, Narendra Modi like, Make in India, Start Up India & all?A.    All of that has to happen throughfiscal policy structure and system of incentives where the government is keen on doing. As we talk about Smart Cities, now if the central government is really serious about creating smart cities it has to reflect in budget allocation process. I would like to see resource allocation and privatisation in terms of sectors where government is emphasizing, that it could be sanitisation, housing for all, pollution control and multiple other factors. If you say this is a priority area and if my budget allocation last year was 7.3 % and it goes to 7.1 % this year that means you are not serious of what you are promising- but yes if it was 7.3 last year and this year it goes to 9.3 %, I will be very very happy to see this.
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Raghuram Rajan, Governor, Reserve Bank of India

 

The Indian economy is currently being viewed as a beacon of stability because of the steady disinflation, a modest current account deficit and commitment to fiscal rectitude. This needs to be maintained so that the foundations of stable and sustainable growth are strengthened. The Reserve Bank continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on the development of inflation. Structural reforms in the forthcoming union budget that boosts growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17.

In current year inflation has evolved closely along the trajectory set by the monetary policy stance. Going forward, under the assumption of a normal monsoon and the current level of international crude oil prices and exchange rates, inflation is expected to be inertial and be around 5 per cent by the end of fiscal 2016-17. However, the implementation of the VII Central Pay Commission award, which has not been factored into these projections, will impart upward momentum to this trajectory for a period of one to two years. Further India is expanding below its medium-term potential, and structural reforms are needed to boost growth without increasing spending and stoking inflation.

Financial markets remain vulnerable to bouts of volatility and capital outflows from EMEs as an asset class. bearish commodity price dynamics are also likely impact investor sentiment.
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Abheek Barua, Chief Economist, HDFC Bank.

"For the banking sector, the central expectation from the budget would be concrete measures to revive investment demand in the economy, specifically a commitment to public spending on capex. We would would also recommend policy measures to address the issue of bad loans such as the creation of a bad bank. 

Measures towards boosting savings that lie within the tax domain such as relief on TDS on interest income could also figure in the budget. Since government borrowings and consequent bond issuance are so critical for banks as it is an important determinant of interest rates, the fiscal deficit and path forward have to be clearly and credibly defined to minimize uncertainty going forward."

Sumit Mazumder, President, CII

 “Given that exports will remain on a declining trend on account of global economic downturn, it is imperative that domestic demand is stimulated. Considering that we would recommend to FM that capital expenditure on key projects in sectors such as roads, railways, irrigation and power be increased substantially,” marked Sumit Mazumder, President, CII. “We think that special attention should be paid to rural demand, which can be supported through spending on rural roads and irrigation. Considering that Allocation should be increased on schemes such as the Pradhan Mantri Gram Sadak Yojana and the Pradhan Mantri Krishi Seenchayi Yojana,” he added.

 “We think FM should take some measures to increase revenue that includes increasing PSUs disinvestment via better planning, reducing subsidy out go, paying pay commission recommended salary in a phased manner and expanding tax base both on direct and indirect tax front,” Mazumdar said.  “We want phase out of incentives should be prospective. Any current incentives applicable to qualifying investments made / activities before financial year commencing on 01.04.2017should be grandfathered,” quipped Mazumdar. On the GST also CII hoped that it would be implemented from April 1 2016.  “We are aware that the government is doing everything possible to make GST a reality. I just wanted to express Industry’s solidarity with you on this journey and hope that in the course of the year we shall see GST getting implemented,” the CII President added.

 “Also it is important that there is uniformity in the application of laws and policies. The officials on the ground enjoy quasi-judicial powers and therefore, interpret policies in their own ways,” he suggested.

Harshavardhan Neotia, President, FICCI

 

“It is good to note that the focus of the government is on productive expenditure that adds to the capacity of the economy and not on consumptive expenditure,” FICCI chief marked while making its suggestion to FM. On the income front, there is a need to widen the tax base – all incomes (irrespective of the source) above a certain threshold need to be taxed. To ensure that there is no tax evasion, the government should consider making filing of returns / declaration of all incomes mandatory over a particular threshold, say Rs. 10 lakhs,” FICCI suggested. Importantly direct tax collection in the current fiscal is estimated to miss the target and government seems to be quite concern full for the same. “Also as the government draws up a plan to eliminate exemptions and reduce the corporate tax rate, we feel that it must simultaneously look at reduction in the Minimum Alternate Tax rate,” Harshavardhan Neotia, President, FICCI said.

Besides ‘ease of doing business’, we need to improve the ‘cost of doing business’ in the country. In this context, the quality and availability of infrastructure assumes great significance. Government must leverage the ‘annuity model’, wherein private investors can recover their cost in a series of semi-annual payments from the Government over the concession period. “Under ‘National Investment and Infrastructure Fund’, government may consider earmarking certain sectors as ‘focus sectors’ on an annual basis. So in first year – we can look at roads and ports, in the second year we may look at airports, in the third year focus can be on inland waterways,” marked Neotia. “This will ensure that sufficient funding gets targeted to specific sectors rather than spreading funds across all sectors in any given year,” he added.

Sunil Kanoria, President, ASSOCHAM 

ASSOCHAM president, Sunil Kanoria thinks that Union Budget 2016 can be a ‘game changer in reviving investment, economic growth and job creation, enabled by the next generation reforms to fast-track India’s economic resurgence.” “We think that more efforts should be on the infrastructure development, so we recommend that a taskforce on infrastructure finance under JS, Infra be setup to take this forward.  Pension and insurance funds should be allowed to invest in any investment grade paper, not just AA,” marks Kanoria.
“Service tax should be paid by contractors to government, only when they receive the payment from the government (this could be deducted from the government’s payment).  Today, contractors don’t have the margin to deposit service tax every month yet receive their payments after many months.  If there’s a default receiving payment, then the service tax on that default should be credited back into the account of the payee,” Kanoria said. “FM should eliminate all surcharges on corporation tax, service tax, etc. This does not promote ease of doing business, when everyone has to calculate taxes to two decimal places. Adjust tax rates where necessary,” he added.  “These startup hubs would be like incubators for all kinds of businesses, especially service and professional businesses,” Kanoria added. 

Jagannadham Thunuguntla, Head-Fundamental Research, Karvy Group

Considering NDA government is reaching mid-way of its term, union budget 2016-17 assumes additional importance. The new government has initiated several reforms on various fronts over the past 20 months. However, market participants, Indian companies and foreign investors have great expectations from the government. In that backdrop, there is a lot more to be done by the new government in ensuring that policy making is reliable, predictable and market friendly.

 

As there is impending slowdown looming in global economy across the nations, it’s high time that India should take advantage of the situation as India is most well placed thanks to the fact fiscal deficit, Current Account Deficit, inflation came under control. Further, India in general is appearing to be better placed than many other nations, in terms of GDP growth, and other macro details. However, if India has to take advantage of these strong macro details by attracting FDI and FII inflows, the confidence on policy making has to be firmly established. In that backdrop, this upcoming union budget can be an excellent opportunity for the government to establish such confidence. The long awaited policies such as GST and Land Acquisition Bill have to be passed in this budget session of Parliament, as these reforms can have huge ramifications on the GDP growth path and in terms of ease-of-doing-business in India.

 

Markets are bit nervous in short term in the backdrop of uncertainties surrounding China and crude oil. However, once the stability comes back, Indian markets are expected to recover quite fast. However, the key remains for the sustainability of Indian capital markets is the corporate earnings robustness. For the past 6-7 quarters, Indian corporate earnings have not been that robust. However, once the earnings pick-up, Indian capital markets can sustain at higher levels.

 

Dinesh Thakkar, CMD, Angel Broking

We expect the government to present a budget focused on increasing investment spending, while staying firm on the fiscal consolidation path. The government understands the importance of increasing investment spending to stimulate an economy already facing global headwinds. Although tax and disinvestment revenues may not support this objective, the sharp reduction in crude prices has offered the government a windfall that will be diverted towards investments in infrastructure, urban development and welfare schemes. We also expect the government to rationalise subsidies and exemptions, which will help generate additional savings for the government.

On a sectoral front, the government is expected to recapitalise the PSU banks, which will help increase their ability to lend. We also expect the government to tackle the NPA issues within the banking sector head-on, which could in-turn mean reforms in some of the troubled sectors such as metals and power. Within infrastructure, we expect more than a 20% increase in allocation towards roads & highways, considering the FY2017 expected awarding targets. Higher budgetary allocation towards the railways will be needed considering the uptick in railways’ bidding pipeline. We also expect further clarity on taxation pertaining to REITs and Infrastructure Investment Trusts, which will be positive for the real estate sector. Besides, further announcements pertaining to execution and financing framework of the Smart Cities and AMRUT initiatives, conversion of 111 rivers into National Waterways and greenfield port projects would be positive to the infrastructure sector.

We expect markets to see some run-up ahead of the budget especially in select plays within the railway and infrastructure sectors. We also expect banks to rally ahead of the budget based on the positive expectations for that sector. We however believe Investors should however not base their investment decisions based on this single event and should invest with a longer term view.
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Rajat Jain, CIO, Principal Pnb Asset Management.

Given the weakness in the rural economy partly as a result of the two successive weak monsoons and weak commodity prices we expect increased focus on the rural areas. This could take form of increased allocations to programs focused on these areas including more focus on irrigation etc. We are likely to see continued focus on infrastructure. There could be further announcements on ease of doing business.

 These sectors could gain from increased spending on rural areas like consumers’ goods companies, companies supplying to agriculture value chain etc.

About retail investors, I must say their allocation to equity/ fixed income should generally be independent of high impact events like the budget whose impact in the near term can be volatile. They should continue to have their asset allocation based on advice from a financial advisor which should be more stable based on their goals and risk profile. Timing the markets close to big events can be quite tricky.

We expect the budget to be good for long term economic growth, given the government’s focus on infrastructure creation. However, this is only an expectation, and we obviously have to wait for the big day.

Ashish Maheshwari

Director, Blue Ocean

More reforms on tax side, rationalisation of subsidies, more infrastructure project related spending, smart city roadmap, I eagerly await. I don’t expect any path breaking tax rationalisation this time as government want to augment resources for infrastructure development and will be prudent to cut fiscal deficit and market is going to like any such non populist budget which work towards fiscal consolidation and resource mobilisation side. I do not expect very industry specific sops, tax cut etc. this time.  

Housing and allied sectors will be again in spot light in this budget. Some government land development focus will also boost allied industries like cement and tiles. Housing finance always moves in the union budget in order to promote low income housing some sops are needed to be made possible to the industry. Solar power is a focus area of the government and government can increase budget and offer sops to promote non-conventional power for commercial and residential usage. More NBFC reforms are expected in this budget. Any fall is a good opportunity to build a good portfolio. As I expect government is not going to come out with populist non achievable type of promises this time and so institutional investors will not exit in panic. So any pre budget fall in stocks due to global reasons should be used to build a good portfolio of mid cap stock.

I do not see very high volatility like earlier budget days as traders’ sentiments are more affected now with global events and markets. Absence of FIIs in buying side will reduce volatility. Now markets are more matured and domestic investors are less leveraged so all panics are used by them to add positions.

Abnish Kumar, Director-Research, Amrapali Aadya Trading

At a time when economic growth is slowing down and private entities are reluctant to new investments, government needs to play the role of anchor by supporting growth. It is true improvement in fiscal consolidation helps in getting better sovereign rating and creates more room for rate cuts.

In FY 15 – 16, government almost achieved the fiscal target through savings in import bill and by slashing higher duty on falling commodity prices. But for FY 16 – 17 the case is all together a different one where it is hit by larger outflow of funds due to OROP and pay commission implementations this math can be matched only through higher revenue collection if the GDP grows significantly.  

So cutting down capital expenditure to meet fiscal math will be counterproductive, when the need is to step up government investment. Investment by govt. in infrastructure creation will significantly improve domestic economic recovery path and job creation. This will lead to greater economic activity in the manufacturing sector like metal and capital Goods which are on sluggish growth path.

Rising disposable income coming out of increase pay from OROP and Pay Commission implementation will create demand for home, car and durables.  Small and payment banks which are scheduled to start their operation in FY 16 -17 will help in savings mobilisation for infra spending and DBT transfer through this newly opened account will increase disposable income of rural un-served consumers there by giving a push to rural consumption story.  From investment point of view greater return can be generated from stocks in automobile, real estate, housing finance, and infrastructure, metals and consumer durables.

Dr. Vikas Gupta, Chief Investment Officer, ArthVeda Capital

We expect a higher allocation towards rural oriented programmes like irrigation, rural roads and agriculture in order to boost the rural economy and there by rural spending. Expected beneficiary sectors from the boost in the rural spending will be consumer goods viz. FMCG, 2- wheelers. Also a boost to the irrigation sector will benefit the pipes’ companies. We expect government to increase the capital expenditure towards improving the infrastructure segment viz. power, roads, irrigation, railways.  Capital goods sector will be a clear beneficiary from the move. We expect greater clarity on the government’s plan of capital infusion in public sector banks especially in the light of increasing figures of non-performing assets. Any positive news related to the infusion will be positive for the public sector banks.

Excise duty hike on cigarettes has been a feature of every budget for past few years and is expected to feature in this budget as well. Negative for cigarette manufacturers.  Already there is a proposal to levy a 40% GST in addition to the excise duty.

Given Chinese currency depreciation and possibility of further increase in imports from China, we expect anti dumping duties especially on manufactured goods like steel, tiles, tyres etc. It will be positive for Indian steel manufacturers, tiles companies, and tyre companies.

Dr. S Ramesh, Senior Professor (Finance), IBA

The Narendra Modi-led government is gearing up to present the union budget for 2016-17 on February 29, at a wrong time when there is a global economic slowdown coupled with global financial markets  having been rattled with developments in China amid a sharp fall in crude oil prices and no change in key rates of RBI and key bills like GST hang in the balance. So, what does this budget hold in store for education sector, especially higher education and the young minds that come out of this sector as wonderful output?

Unfortunately, the earlier budgets had hardly any innovative idea for the Indian education sector. The Indian education sector needs a fresh thinking and a new approach. Opening new institutes and providing resources to certain communities are political and welfare driven activities. The most critical aspect missing in the Indian education sector is Quality of Education.  Education must be considered as Development, which provides a national competitive advantage and not Welfare measure. Our Focus in this budget should be on innovative ideas for education sector and providing high quality education and educated young youth as the main driver for economic growth. “Higher Education and high quality skill sets of our youth will enable them to get employment, is the altar before which we must all bow. To ensure that, the quality of higher education and learning outcomes are of paramount importance. 

Even though budget allocation for higher education was given a planned allocation of Rs.15, 8555.26 crore in 2015-16, an increase of nearly 22% over the previous year, was not good enough for providing high quality education in the higher education industry across India.
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Utkarsh Jain, CLO, FinTree Education

 

Since taking office in mid-2014, Narendra Modi-led government has been at the forefront of many business friendly initiatives like Make in India, Digital India, Smart Cities and the most recent campaign promoting Start Up India, thereby giving the burgeoning start-up industry some serious push. As these flagship initiatives of the government has gained quite a bit of limelight in the past year and half, from hereon, we would expect government to focus on the implementation aspect of these mega plans and chart out a way to raise funds for these scheme in the forthcoming Union Budget. We would also expect clarity from the government on their legislative bills, which are stuck in the parliament like the all-important GST and Bankruptcy Bill, which is directly going to affect the economy.

As government is focusing on manufacturing sector this trend is expected to continue for the coming future. We would also expect government to focus on the rural segment in order to revive the ailing rural economy which has been bogged down by two years of deficient rains. Agriculture friendly budget can be a real boost to the sector.

We are hopeful of markets stablising post budget. A non populist and reformist budget would augur well for the overall economy of the country as it would show the governments intent to stick with the prudent fiscal targets and move in a direction of rationalising subsidies. We also expect the union budget to infuse fresh energy into the private sector as they have been wary of undertaking any fresh investments given the tardy economic growth of the country.

Manjula Pooja Shroff.

Chairperson, ALTUS Learning

 

We are hoping to hear some hard- crack policy measures from the Finance Minister, Arun Jaitley in the upcoming union budget, 2016. Apart from hoping for a higher allocation for the education sector, it will be in the right mood if specialised vocational courses are in some way brought within the ambit of school curriculum to start early. This will help to tap talent in a requisite field at an early stage and help guide a child’s career. This could also add to the larger purpose of a skilled India.

The previous budget had made provisions for more All India Institutes for Medical Sciences, IITs and IIMs. It will be interesting to hear on the progress made on them, incentives provided to foster an environment of scientific learning and stop brain drain. Girl child education still remains a crucial factor and I hope the Finance Minister takes this into account to devise special infrastructure, schemes and mechanisms to rope in those who are far-flung and beyond city contours and encourage them to learn. Student exchange programmes must be institutionalised and mutual exchange of best practices and knowledge being set as a mode to learn.

Global economies are now testing their mettle and are at a vulnerable stage. Yet all eyes are on India as it tries to tame the odds and rise on economic growth. This calls for stringent measures.

India kick started one of the largest food assistance programmes through the Mid-Day Meal scheme and I do hope it is strengthened further with benefits seeping down to those in need. Markets have been sensitive and I do hope the desired punch is packed in to boost its spirit. 

Anuj Puri, Chairman, JLL India

The union budget should pay specific heed to this pressing need- on purchase into an under-construction property, buyers can only claim tax benefits of Rs. 2 lakh after possession if construction is completed within three years. The benefits reduce to Rs. 30,000 if the builder delays construction beyond this – and they pay higher interest. First-time home buyers purchasing properties for self-use additionally pay rent.

Instead of allowing home buyers tax benefits post-possession, the union budget should make a provision that allows these from the time they start paying interest on housing loans. This will ease their monetary burden considerably and make increase the velocity of home loan disbursements. Similarly, if an under-construction property is purchased from capital gains, its construction must be completed within three years of its sale to avail exemption. There can be delays by developer in such cases too. These deductions should be brought at par and the construction timeline should be extended from the current three years to five years.

The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant given the ticket sizes in cities like Mumbai, where most houses are priced at Rs 1 crore and above. Also, tax concessions on house insurance premiums could be introduced to encourage end users to insure their homes. Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.

Kishore Bhatija, MD,Real Estate Development, K Raheja Corp

At a time when there is uncertainty around the world with global markets tanking and failing to keep the mood upbeat, all eyes will be on Finance Minister Arun Jaitley to keep the faith in the Indian economy unfaltered.

Initial feelers and published reports suggest that the government this time will steer clear of populist measures and take bold steps for a steady performance.

I hope there will be enough considerations to raise the threshold limit for tax deducted at source and raising the tax exemption bar for common tax payers. I think Union Budget 2016 will lay a lot of focus on infrastructure. We hope to see a necessary push delivered to revive and rejuvenate the prospects of PPP projects. A re-introduction of infrastructure bonds, I feel, can be a boon. We hope there are clearly stated measures to simplify tax norms. We do hope to see the long-pending DTC rolling.

Real estate and auto sector has been gasping for breath and this could call for immediate measures. ‘Make in India’ will occupy a larger mindshare. The government has already imposed a ban on duty-free import of capital goods for power generation and transmission projects. This will set the tone before the budgetary announcements.  Local manufacturing will receive a fillip. Retail investors need to be incentivized to participate and essential tax breaks can lure them to place their bet on stocks.

Startups have got a dedicated policy already and interest breaks and we hope to see MAT exemption and interest rate benefits trickle down to them.

Rajesh Prajapati, MD, Prajapati Constructions

We expect a real estate friendly budget.  We want the government to support the real estate sector through funding similar to Infrastructure industry which has the potential of attracting huge foreign direct investment. We hope that the Land Bill will be cleared during the budget session itself. Clarity on the land acquisition policy is the need of the hour since it forms a key element for the development of realty and infrastructure sectors.

The government should remove or, at least reduce the service tax substantially. Similarly, we look forward to income tax exemption for affordable homes built for EWS and LIG segments, and tax concessions for construction companies to incentivise them to build low cost homes.

The sector also hopes for clarity on GST Bill which has been long pending. In the upcoming budget, we expect the government to introduce the much discussed and much awaited single window clearance system which will bring transparency in the overall working system. We also hope that the Finance Minister will cut duties on building material such as cement and steel to help reduce cost of construction so that the benefits could be passed on to the ultimate home buyers.

ABHAY A NAHAR, MD, NAHAR DEVELOPERS

 

We are eagerly waiting for the Union Budget. The decisions and allocations made by the Government of India and particularly Finance Ministry will have a great impact not only on the real estate sector of India but also on other industries and individuals.

The real estate sector is very sensitive to the policies announced by the Finance Ministry. This sector has seen a very slow pace in past few quarters and is now emerging and looking for sign of hope and relief.

Government should provide more incentives to boost the development and consumption of sustainable real estate. There should be enough allocation in the infrastructure sector in the country and more preferably in developing areas to boost the development in the country.

Cheap financing options should be made available to developers along with the buyers as this will lower the construction cost and increase affordability of the buyers with low EMIs. Simpler tax norms, tax savings on housing loans, housing insurance shall also be provided. This will encourage the developers to focus on low cost housing and achieve the Governments vision and goal of ‘Housing for all by 2022.’

We don’t see this budget as a populist budget. We expect one window clearance from all the Government bodies for the real estate sector; this will basically ease the work process and timely deliveries can be made possible, there will be no more delays in projects.

Our advice to the buyers and investors will be to make the best out of this bottomed out market. Since the real estate sector has seen a long span of slow down, it is expected to a good leap in long run

Pravin Patel, Chairman, HOF Furniture System Pvt. Ltd.

The last few months preceding the union budget has been a nerve racking one with all eyes on the performance of the Chinese indices. Our very own BSE has also reeled under the influence of few hits and misses. I think the government will take all of this into consideration to announce policies that will help negate few of the adversities. Sectors such as manufacturing, infrastructure could be big on the agenda. Prime Minister Narendra Modi has made his objectives clear about Make in India. I hope to see key domestic manufacturing incentives announced, yet tax incentives that businesses have been enjoying so far could narrow down. High networth individuals may feel their pockets pinched harder.

I do hope taxation laws are simplified and DTC sees the light of day. Taxation benefits have to be provided for retail investors’ faith to be restored in equity markets. I do not expect anything extraordinary in the ways the market will react in the days ahead of the Budget or after it. It has always been reactive though and I expect the Finance Minister will keep this in mind to prevent wipe-out of gains. It is a time for start-ups to rejoice and there could be measures announced for them to take advantage of foreign funds.

We should brace for tough measures, given the overall macro scenario. I expect the duty tariffs to be kept in check and if global multinationals are encouraged to set up base within India, export benefits will also be necessary.

Gunnit Singh, Managing Director, SUICH Industries

The central government is very much focused in IT driven solution to make the country smarter which is already giving an energy to player like us. Being a MSME, we need encouragement from Government of India in terms of Tax standard operating procedure, reduction on MAT and allocate a smart budget to empower the manufacturing sector and success the PM vision of Make in India.  Government should also introduce social monetary incentives to formulate our research more advanced and authentic which can be converting in good product output. Implementation of GST, exemption from VAT, Sales Tax will keep the production capacity to the next lever where other countries are at this time.

IT sector is always the priority of Modi Government, E- Governance, Digital India and StartUp India are the reflection of vision of central government how much they are concern for this industry. Startup, Software and Hardware development firms, research organisation, will be directly benefited from these smart initiatives. Manufacturing sector is already in the right track and it is helping to other related industries to automatically. These industries will register a double digit growth in next 1-1.5 year.

This year India has seen number of growing startups and around 30% of startups have got huge funding internationally and leading business house/ individual from the country. This initiative is creating end number of entrepreneur in the country which will lead to create a huge employment opportunity in the country especially in IT sector. Once the employment will increase, buying/investment capacity will increase in-continuation. This will make a great contribution in the economic and social development of India. 

Market would be stable during the budget days and it will see a little up in March but from the new financial year it will be very positive mood.  Red carpet is already there for every industry we just need to walk on it intelligently and make our venture profitable and contribute largely in the overall growth of the country.

Ashok Nehra, Head- Development & Strategy, Rays Power Experts

Solar industry growth will largely depend upon upcoming budget, we will be observing this year’s budget with lot of hope. Solar power projects are capital intensive but with zero fuel cost for life of project, good support in initial years of projects will make such project viable and lucrative for investors and consumers both. Points which can make solar project more attractive are removal of MAT for solar projects for initial 10 years, allowing financial institutions and banks to lend for 25 years for solar power projects, increase in priority sector lending limits from Rs 10 cr to Rs 50 cr for solar power projects. Solar projects have over 60% imported components, hedging support will help in viability of projects. Cheaper power for domestic manufacturing and providing funding for manufacturing in India are major points, which will support solar industry.  

Introducing financial products for solar rooftop in line with housing, car or personal loans. Tax credits for individual investors will be major boost for solar rooftop projects.

Chintan Sheth, Director, Sheth Corp

The budget 2016 will be a crucial affair for the realty market. There are huge expectations from the Government which is already making the right moves creating the perfect atmosphere for the industry.

Firstly, the Government needs to put in place the single window clearance for projects. While the demand for housing in metropolitan cities is only on the rise, and the industry is not able to bridge the gap between demand and supply quick enough as the already lengthy process of construction is further increased by the difficulty in obtaining permissions.

Mumbai’s realty market focuses on the mid and the affordable segment of home buyers. The Government can exempt Income tax for affordable homes built for economy weaker sections and low income groups.

The reduction of service tax will take off huge load off the shoulders of home buyers as they are already loaded with several other taxes.

We have a strong trust in Government that the real estate bill which was the most awaited and discussed shall pass by 2016. This will boost the entire industry and will definitely prove to be a game changer for the market. The impact of this bill will be profitable to both consumers as well as builders as it will bring transparency in the industry and confidence amongst buyers.

Also, the Government needs to bring in control and stabilize raw material prices as they have a direct impact on final price of the product. Introduction of GST will help in curbing multiple taxes which is a positive sign for the industry and result in buyers coming forward to buy property.

The realty market is growing at a steady pace and there is much more development which will take place if the industry expectations are met from the budget.

Abhishek Goyat, MD & CEO, THE ANTRIKSH GROUP

The new financial year would be the revival year for the industry and it will gain the momentum once again as most of the industries are in positive mode starting from manufacturing to service. To aid the faster revival and achieve the good growth as well as to provide a significant boost to the economy in general, the union budget must address the issues like clarity on GST implementation, providing more tax saving on housing loan and house insurance premiums and more incentives to boost development and consumption of sustainable real estate. 

Manufacturing sector will record the major growth in new year as Make In India has been a big hit for the country. Even MNCs are setting up their manufacturing units in India which will bring advanced technology, skilled professional and innovation. It will not only provide a healthy competition but also empower the Indian manufactures as well.

Regulatory bill and recent order issued by Supreme Court and lower courts in favour of buyers will give more power to end users and they will feel more safe and comfortable to invest in properties. This is the right time to invest in properties after a continuous slowdown for three years. Property prices are stable from the last few years and interest rates have also come down. So, if you want to invest in housing segment you will get the same price which you were getting in year 2011-2012, however the construction cost has increased. The regulatory bill will also directly benefit the end customers and the developers will be made more accountable and will have to deliver the projects on time. If you are investing this year, property valuation would see a surge of minimum 22-25% in next 3 years.

Suresh Saraf, CMD, Saraf Foods

At a time when there is uncertainty round the world with global markets tanking and failing to keep the mood upbeat, all eyes will be on Hon’ble Finance Minister Arun Jaitley to keep the faith in the Indian economy unfaltered.

Initial feelers and published reports suggest that the government this time will steer clear of populist measures and take bold steps for a steady performance.

I hope there will be enough considerations to raise the threshold limit for tax deducted at source and raising the tax exemption bar for common tax payers. I think Union Budget 2016 will lay a lot of focus on infrastructure. We hope to see a necessary push delivered to revive and rejuvenate the prospects of PPP projects. A re-introduction of infrastructure bonds, I feel, can be a boon. We hope there are clearly stated measures to simplify tax norms. We do hope to see the long-pending DTC rolling.

Real estate and auto sectors have been gasping for breath and this could call for immediate measures. ‘Make in India’ will occupy a larger mindshare. The government has already imposed a ban on duty-free import of capital goods for power generation and transmission projects. This will set the tone before the budgetary announcements.  Local manufacturing will receive a fillip. Retail investors need to be incentivized to participate and essential tax breaks can lure them to place their bet on stocks.

Startups have got a dedicated policy already and interest breaks and we hope to see MAT exemption and interest rate benefits trickle down to them.