Around the Globe

Around the Globe

Carefully designed budget to benefit all sets and subsets of the country

I endorse the government’s vision of a financially inclusive and digitally enabled India, reflected in the Union budget 2017-18. This year’s budget has been pathbreaking in its design intended to enhance administrative efficiency and eliminate redundancies in the system. The budget encapsulates the most pressing aspects of the country, as outlined by the finance minister in his ten themes.

A fine balance between fiscal discipline & inclusive growth

The key take away from the Union budget has been fiscal prudence. There was pressure for an expansionary budget from different quarters but finance minister has rightly kept the fiscal deficit at 3.2 per cent of GDP in 2018 and, at the same time, focussed on rural spending and infrastructure to achieve a fine balance.

Quite a balancing act

The Union budget clearly focuses on fiscal prudence while furthering the agriculture and rural economy for an inclusive growth. I would say that the 10 distinct themes identified by the finance minister impacting both economic and social development, demonstrate the government’s ingenuity in balancing public spending and fiscal deficit.

Kudos FM for not giving in to big bang populism

With elections to five Assembly Elections round the corner there was both apprehension as well as heightened expectation of big bang populist announcements. The finance minister has done well not have given to such populist pressures. This sobriety in approach in the present charged environment itself makes this a remarkable budget.
In the agri-rural space the finance minister has given a 24 per cent hike. If the bulk of this goes towards productive infrastructure it would give a fillip to the rural economy and create jobs.

FM invokes Mother india

After the pain, it is time for gain. Finance minister Arun Jatiley stuck to this simple mantra as he presented the most decisive budget of the Narendra Modi government. Sticking to the simple formula of GDP = C (consumer spend) + investment (capital formation has been weak) + G (government spend) + exports/imports (which are inelastic), he knew very well that the extended pain resulting out of the currency swap exercise needed a salve and this could only manifest itself through government spending.

FM deserves kudos for focus on rural economy

The finance minister’s budget will have a significant impact on the economy, boosting growth levels, improving the standard of living of millions of farmers in rural areas and providing enormous opportunities for the country’s youth.
The government’s decision to boost investments in the rural sector will see a major transformation in our villages and farms. The allocation for the rural, agriculture and allied sectors has jumped by nearly 25 per cent to Rs.1.87 lakh crore, a massive increase in crucial funding.

No clear roadmap for doubling farmers’ income in 5 yrs

Finance Minister Arun Jaitley has presented three budgets. Except for repeating the promise of doubling the farmers’ income in the next five years, I haven’t seen any clear roadmap being laid out. Like the last year, this year too he reiterated his promise without even making a mention of the terrible agrarian crisis that prevails. Only a few weeks back, the National Crime Record Bureau (NCRB) had estimated 12,602 farm suicides for 2015, the latest year under investigation, up by 3 per cent from the previous year.

‘An exercise that serves its intended purpose’

In order to address the issue of thin capitalisation, it is proposed to provide that the interest paid by an Indian company or permanent establishment of a foreign company, in excess of 30 per cent of earnings before interest, taxes, depreciation and amortisation (EBITDA), or interest paid to its associated enterprise, whichever is less, shall not be allowed as deduction in computing its taxable profit. It is also proposed to allow carry forward and set off of the interest so disallowed for eight assessment years”.

A clinical effort to contain fiscal deficit

This budget has come on the back of looming risks from global markets such as increasing rates and diminished capital flows on account of the Trump policies. It has been a very clinical effort to contain fiscal deficit at 3.2 per cent, increased focus on rural areas, affordable housing and infrastructure spending. As for capital markets, they will breathe a sigh of relief with no negative implications on long term capital gains (LTCG) and the tenure for classification of the same.

Equity market has several reasons to celebrate

The Union budget has soothed frayed nerves of equity market investors, who were earlier concerned. The bulls have several reasons to celebrate. The first positive is no change in tax structure on capital gains, gift tax and estate duty.
The fiscal deficit target looks realistic with assumption of modest 8.8 per cent growth in indirect taxes in the year of GST implementation. For institutional investors, fiscal prudence and containing the deficit at little above 3 per cent is a positive.