Budget is a mixed bag of announcements: Kishore Biyani
Finance minister Arun Jaitley has just completed his Union Budget 2016-17 speech. Let’s hear what industry experts and leaders are saying about it:
“I look at the budget purely from the lens of Consumption. To me consumption equals to development and from that point of view this budget is a mixed bag of announcements for me. I believe the government’s intention was quite positive but it had to walk on a tightrope, juggling between social and economic reforms at the same time. I saw various measures in this budget that would help the consumption and in turn the development.
“Announcements like increasing the limit of deduction for health insurance premium and increase in the deduction for rent paid for people living in the rented houses is going to increase the monthly disposable income. While I see quite a few positives in this budget, I see one announcement that can prove to be a dampener. Making PAN mandatory for any purchases above one lakh rupees is going to have a serious impact on consumption. Not more than 13 percent of Indians have PAN card and only about 4% of them pay Income Tax. Without expanding the PAN and Income Tax net, a move like this will enormously hamper the consumption space. I expect its significant impact on retailing as well as on manufacturing, especially of Consumer Durable products like televisions, gadgets, furniture and other home products.”
—Kishore Biyani, chief executive officer, Future Group
“The Union Budget for financial year 2017 is a pro-agriculture, pro-rural sector budget. The finance minister has highlighted agriculture and rural sectors as two of the nine pillars of this year’s Union Budget. The provisions for this year’s budget are expected to revive rural consumption, which has been subdued for the past two years primarily due to poor monsoon and untimely rains, and has had a detrimental effect on overall consumption across all sectors in the last 2 years.
“The move to create a unified agricultural market e-platform will benefit food-based FMCG companies, as this is expected to make procurement processes easier and more transparent, when compared to the APMC route. In addition, the permission for 100% FDI in the marketing of food products is expected to bring in more investments into the food processing sector, especially the downstream supply chain, as well as allowing foreign multi-brand retailers to set up food-only retail stores.”
—Rajat Wahi, Partner and Head of Consumer Markets, KPMG in India
“Overall, this is a responsible “Rural First” budget that attempts to revive demand, while continuing on the path of fiscal consolidation. For the FMCG sector, initiatives to support the revival of rural and urban consumption should help bring growth back on track. Focused efforts on alleviating rural distress and uplifting the agrarian economy, will help put more money in the hands of farmers. Statutory backing of the Aadhaar scheme will ensure more targeted delivery of benefits to those who need it. The need of the hour is job creation and focusing on skilling and education to make people more employable. The implementation of transformative reforms, like the GST, at the earliest, are however imperative to fast track economic growth and boost consumer confidence. Given the government’s intent to stick to its path of fiscal consolidation, we look forward to an interest rate cut or more liquidity in the system to drive private capital investment. Going forward, given the plethora of schemes that have been announced, it will be important to deliver on the promises made through effective on-the-ground execution.”
—Vivek Gambhir, managing director, Godrej Consumer Products Ltd
“Government has been facing many challenges and keeping the fiscal discipline in control is one of the most significant one, especially, when the world economy is passing through major socio-political turbulence. Keeping the fiscal deficit at 3.5% and yet meeting the growth and social objectives is a difficult task which the finance minister has attempted to solve. There are no major negative surprises during these challenging times and that’s good about this budget. All the sectors viz. agriculture, infrastructure, oil & gas, realty, rural development, manufacturing, banking & tax reforms have been well addressed. Focus on infrastructure & rural sector, which are the backbone of the economy & society, provides major impetus to the industries in the long term. Overall this year’s budget can be termed as a good effort”.
—Aditya Agarwal, director, Emami Group
“Finance minister Arun Jaitley’s nine-point-agenda Budget is a balanced statement that seeks to move away from offering freebies to promoting investments. It is highly encouraging to see that fiscal discipline has been given priority in this year’s budget, with an emphasis on improving the quality of life in Rural India. The Union Budget 2016-17 was going to be a tough balancing act for the finance minister, given the strong headwinds on both the global and the domestic economic front. And he has managed it well. With a plethora of announcements, be it in the form of greater focus on farmers and rural development, promoting investments in Infrastructure and health care and opening up FDI in food processing, the finance minister has taken positive steps that would not just boost overall confidence, but also go a long way in generating employment.”
—Sunil Duggal, chief executive officer, Dabur India Ltd
“We shift to the other red carpet: the one leading to parliament and the budget. We’re looking for an Oscar for the best production, not acting.”
— Anand Mahindra, chairman, Mahindra and Mahindra Ltd, on Twitter
“I would rate the budget 7/10 from the point of government’s inclusive economic development agenda. It is a pro-people’s budget with an aim to balance rural and urban growth. Infra and agri sectors are the main beneficiaries of this budget. The urban-rural connect through roads and electrification is a good move; however, it’s critical to ensure these allocations are utilized during the year. Sadly, there is nothing innovative in the budget that could boost investment in the manufacturing sector to support the ‘Make in India’ agenda of the government. The real job creation and economic growth will come with boosting the manufacturing sector. Disappointed to see a downgrading of R&D (research and development) weighted tax deduction from 200% to 150% but welcome introduction of Patent Box regime at 10% tax rate to boost IP (intellectual property)-based income.”
— Kiran Mazumdar-Shaw, chairperson and managing director, Biocon
“It will be a game-changing budget (for rural demand), though not immediately but in the longish term. I think in the current scenario, the biggest downer for all consumer companies is consumption, especially that emerging out of rural pockets; we have not seen an uptick in demand in a long time.”
— Varun Berry, managing director, Britannia Industries
“The government continues to incentivize the start-up ecosystem as we have seen in the recent budget pronouncement. I am glad that the government clearly recognizes that start-ups can be powerful problem solvers for the myriad issues facing the country and in turn generate employment as well. The government’s decision to allow for 100% deduction of profits for three out of five years between April 2016 and March 2019 is certainly a welcome step that will boost start-ups.”
— Mohandas Pai, co-founder, Aarin Capital
“It looks like a post-euphoric budget of a government that has settled in, run up against the structural and episodic constraints of the Indian economy and decided that it has limited maneuvering room. This might be the budget that is truly representative of the Modi government’s policy mindset, whatever value judgements that you might want to put on it.”
— Nithin Pai, co-founder, Takshashila Institution, a think tank on public policy and geopolitics
“The finance minister’s focus on agriculture in the Budget 2016-17 was keenly awaited and will enhance expenditure on the rural and agriculture sectors. Although the soil health card scheme, Fasal Bima Yojana and common e-market platform will help in improving the agriculture sector in the country. However it is disappointing to see no encouragement for agri-biotech research by public or private institutions for augmenting the agriculture sector.”
— Dr Shivendra Bajaj, executive director, Association of Biotechnology Led Enterprises, Agriculture Group
“Despite massive expectations and build-up, no new start-up initiatives were announced. Changes to the capital gains tax, 100% tax deduction on profits made by start-ups in the first 3 years, new laws for ease of doing business, changes to the companies act and regulations in the patent law were already announced during the Start-up India initiative. Nonetheless it was good to note the government encourage digital literacy, importance of accountability on finance and taxation matters and financial inclusion.
— Bipin Preet Singh, CE0 and co-founder MobiKwik, a mobile payments wallet company
“The road orders will definitely increase. But the government should have allocated specific funds for projects stalled because right of way issues, as the sector is dependent on the baking system for funds. Secondly, the funds allocated for bank recapitalization is not high too. The NHAI was never deficient of funds, so a specific allocation would have helped.”
—K.G. Naidu- VP, finance, Gayatri Projects
“It’s amusing that year after year the Government creates new initiatives and expects CSR funds to flow into these initiatives, be it Swachh Bharat Kosh or Clean Ganga, the Prime Minister’s Relief Fund or now Higher Education Financing Agency.” He added that this defeats the purpose of CSR, where corporates should decide what kind of an impact they want to have on the environment they operate in.
— Noshir Dadrawala, Centre for Advancement of Philanthropy, a CSR consultancy
“The budget combines capital expenditure on agri, social and infrastructure segments along with structural reforms through subsidy rationalization and direct benefit transfers like the marquee scheme of Jan Dhan Yojana, Aadhar, Mobile ( JAM). This will place our economy in the double digit growth trajectory. Further, the governments’ commitment for retaining the fiscal deficit at 3.5% will result in the yield in the governments bonds as well as cost of capital coming down. Also, steps proposed to create a national market for agri produces through e-platform is an innovative process to enhance the rural income. Over all this the right budget for our economy at this point of time.
—Ashok P Hinduja, Chairman, Hinduja Group of Companies (India)
“We feel that the budget is in lines with the overall agenda of development by this government. Thrust was given to infrastructural sectors such as roads. There has been significant focus on the rural economy, which is good looking at the situation in our country. There is also a good emphasis on affordable housing. We generally feel that the attempt to simplify tax administration is laudable. The move of 15% dispute tax is also laudable. This is a good budget with good emphasis on infrastructure but there is some devil in the detail.”
—Harshavardhan Neotia, President of FICCI and chairman Ambuja Neotia Group
There has been a push on the social sector, particularly healthcare. The insurance policy offering coverage to the people that government is planning is on the right direction. On skill development area, we still need to see more. However, the beginning has happened. The infrastructure sector push is the highlight of the budget. Agricultural sustainability initiatives also will actually give long-term benefits from this budget. There has been some tax areas where Easwar committee recommendations were accepted. Overall, I see the budget gives thrust on economic development.
— Pankaj R. Patel, chairman and managing director, Cadilla Healthcare
“With a specific focus on improving the livelihood of India’s soul, its rural population, the Union Budget 2016-17 seems to be aimed at putting more money in the hands of the citizens. Three specific initiatives that I think will go a long way in creating an educated, healthier and stronger India are the government’s aim to double income of farmers in five years; new initiatives to increase irrigation access, and its objective to skill 1-crore youth in the next three years. On the other hand, healthcare has finally taken the center stage in the Budget. The announcement of a National Dialysis Services Programme could not have come at a better time, given the burgeoning growth of non-communicable diseases.”
— Dr. Prathap C. Reddy, Chairman, Apollo Hospitals Group
Affordable housing is an area of highlight as far as I am concerned. Measures on infrastructure and agriculture are all moving towards the right direction. His aim to skilling of India is a good move. The Budget is for the country and pro-development. An additional focus is given on start-ups and MSMEs. Overall, I see a good budget pushing infrastructure and agriculture sectors.
— Jyotsna Suri, chairperson and managing director, Bharat Hotels
“The budget has put in spending both in social infrastructure as well as physical infrastructure. This will propel growth engine and economic growth. Budget cannot be a document for every industry. It is a more holistic and a more macro view. Exports are challenged not only because of India because of the economy worldwide. I am sure the government is having a close look at the exports. I heard him saying that there will be FDI in food products manufactured in India. One will have to see the detail of that, it is just a cursory statement, but I believe that it gives an impetus to the industry.
— Rajan Bharti Mittal, vice chairman and managing director, Bharti Enterprises
“It needs to be seen whether the proposals in infrastructure sector gets executed on ground. Importance was given to infrastructure and affordable housing. The highlight of the budget was its special thrust on agriculture and measures taken to double the income of farmers. The thrust on digital arena is also laudable. The attempt to increase taxation on higher tax payers is a disappointment. Several changes were made on customs and excise duty.”
— Harsh Pati Singhania, vice chairman and managing director, J.K. Paper Ltd
“This budget shows a lot of focus on rural areas. The crop insurance scheme and other allocations shows the government’s tremendous thrust on improving farmers welfare. The linking of rural roads, 100% electrification by 2018 and a lift in farmers income are positive signs. I feel, even if you double the farmers income it would stand less than 20,000. The increase in income should have been tripled or more than that. But whatever that has been announced for rural improvement should be welcome.”
— S. Chandramohan, president and group CFO, Chennai-based Tractors and Farm Equipment Ltd
“From our perspective it was a very lacklustre budget. While the roads and irrigation sector got good allocations, there was nothing specific for other sectors like power and airports. Nothing much was contemplated for these sectors.”
— Isaac George, chief finance officer, GVK Power and Infrastructure LtdAmerican multi-brand retailer, Wal-Mart Stores Inc,. welcomed the decision. Walmart currently operates stores through 100% FDI in wholesale retail through large format cash-carry stores.
“The decision by the government to allow up to 100% foreign direct investment (FDI) through FIPB in marketing of food products produced and manufactured in India is very progressive and will help in reducing wastage, helping farm diversification and encourage industry to produce locally within the country.”
— Krish Iyer, president and chief executive at Walmart India
“The finance minister’s focus on agriculture in the Budget 2016-17 was keenly awaited and will enhance expenditure on the rural and agriculture sectors. Although the soil health card scheme, Fasal Bima Yojana and common e-market platform will help in improving the agriculture sector in the country. However it is disappointing to see no encouragement for agri-biotech research by public or private institutions for augmenting the agriculture sector. We further believe that for transforming the Indian agriculture, counter the ill-effects of climate change, improve livelihoods and address food requirements of the nation technological intervention is of utmost importance.”
— Dr Shivendra Bajaj, executive director, Association of Biotechnology Led Enterprises, Agriculture Group
“Enhanced allocation in road and highways sector by around 22% is definitely a positive for this sector. However, role of private sector investment would be key to achieve the target of 10,000 km of National Highways construction during FY 2016-17. Therefore, two initiatives such as Public Dispute Resolution Body and Guidelines for renegotiation of PPP contract are important to provide necessary impetus to the PPP model of procurement in roads and highways sector which has suffered due to disputes and litigations.
— Vikash Kumar Sharda, director, Capital Projects and Infrastructure (CP&I), PwC India
“While there are a few hits and misses, the budget has been in line with the overall plan. The quantum of funds for rural and agri sectors is impressive but not for bank re-capitalization. It’s a fairly decent allocation for the infra segment. Private participation is less likely to come with NHAI (National Highways Authority of India) alone spending around Rs.70,000 crore. But overall, more expenditure on the roads segment is a good sign.”
— Goutham Reddy, executive director, Ramky Group
“The road orders will definitely increase. But the government should have allocated specific funds for projects stalled because of right-of-way issues as the sector is dependent on the baking system for funds. Secondly, the funds allocated for bank recapitalisation is not high. NHAI was never deficient of funds, so a specific allocation would have helped.”
— K.G. Naidu, vice-president, finance, Gayatri Projects Ltd
“Overall a good budget in line with the focus of the government on Make in India promoting growth and reducing tax litigation and compliance burden. One of the most ground level, a very positive tax proposal is granting stay to taxpayers upon payment of 15% of the disputed tax demand pending disposal of appeal. This will go a long way in avoiding harassment of taxpayers. This proposal needs to be applauded. The scheme for addressing the problem of domestic black money is another significant tax proposal. One will have to see the fine print in terms of how this scheme will actually work.”
— Sanjay Sanghvi, Partner, Khaitan & Co., on tax litigation
“The recognition of gaps in the current insolvency and bankruptcy regime and the proposed introduction of the bankruptcy code is a step in the right direction. However, much will depend on the insolvency related eco-system that will need to evolve to make these measures a success.”
— Nikhil Narayanan, partner, Khaitan & Co., on bankruptcy regime
“The budget does not have much to cheer about for the private equity industry. No changes on pass-through for all categories of AIFs (alternative investment funds) and relaxation around safe harbour rules have been disappointing. Real estate investors, although, have something to cheer about with tax relaxations on affordable housing and pass-through for REITs (real estate investment trusts).”
— Aakash Choubey, partner, Khaitan & Co., on private equity and REITs
“The Union finance minister has proposed to circulate a model shops and establishments bill. While this will still be voluntary for states to adopt, it will bring a great level of the much required consistency between multiple state laws from the perspective of labour reforms and ease of doing business.”
— Anshul Prakash, associate partner, Khaitan and Co., on ease of doing business
“The government has stuck to its fiscal deficit target of 3.5% of GDP (gross domestic product). The debt market has taken it positively as there was some fear of the government not adhering to its fiscal deficit target as the government was keen to re-capital the banks and provide another round of capital spending to boost growth. The total gross borrowing is targeted at Rs.6 trillion, this is lower than market expectation of Rs.6.5 trillion. We expect RBI (Reserve Bank of India) to cut repo rates by 25 basis points as RBI has stated it will look at the fiscal deficit numbers for cutting rates.”
— Murthy Nagarajan, head (fixed income), Quantum AMC
“The budget is largely neutral from market trajectory point of view. The positive was that the finance minister stuck to the fiscal consolidation target, which give investors comfort from the macro-stability perspective.”
— Gautam Chhaochharia, head of research at UBS Securities India Pvt. Ltd
“Budget 2016 is an incremental move in the backdrop of global uncertainty. Maintaining a fiscal deficit of 3.5% is a very credible step for the financial markets, robust outlays for infrastructure, agriculture, rural and socio-economic schemes; however, one can argue that more could be provided for recapitalization of banks. No change in capital gains tax regime for listed stocks is a positive for the stock exchanges. An additional tax of 10% on dividends in excess of Rs.10 lakh and increase in STT on options are dampener for the markets... Further, many provisions to build confidence with taxpayers with a view to reduce litigations and commitment to no retrospective amendment. All in all, in the backdrop of the prevailing global scenario, Budget 2016 a good pragmatic balancing act.”
— Girish Vanvari, national head of tax, KPMG, India
“The Rs.25,000 crore recapitalization number is definitely a negative risk. This gives no comfort with respect to the position where public sector banks are at right now. Public sector banks will now take at least two to three years for complete revival as their credit growth will be limited due to capital concerns. We need to wait and see how (bad loan) recoveries take place in the banking system now. That will be a key driver for growth in the sector.”
— Vaibhav Agrawal, vice president (research), Angel Broking
”The government hasn’t bitten the bullet. But the finance minister has left a small window open by not referring to the Rs.70,000 crore number that was initially talked about for recapitalization of public sector banks till March 2019. This would mean that they might review the total recapitalisation number later. Fitch Ratings may not consider this as a major event warranting re-rating of public sector banks as the negative surprises were already accounted for.”
— Saswata Guha, director-financial institutions, Fitch Ratings