Finance minister Nirmala Sitharaman’s maiden Budget for the financial year 2019-20 is a good vision document for the direction in which the country wants to progress to become a $5-trillion economy in the next few years, the captains of Indian industry feel, but could have contained more provisions to ensure short- to medium-term growth.

Sitharaman, the first woman finance minister to present a Union Budget, sought to touch upon several sectors of the Indian economy—including infrastructure, housing, the financial sector (including banks and non-banking financial companies), electric mobility, startups, and corporate India in general.

“I wish to propose a number of initiatives as part of a framework for kick-starting the virtuous cycle of domestic and foreign investments,” she stated at the beginning of her speech, and went on to outline a slew of measures—some of which were specific in nature, while others were more generic.

Kiran Mazumdar-Shaw, chairman and managing director of Bengaluru-based biopharmaceutical company Biocon tweeted that she gave “full marks” to Sitharaman for presenting a holistic, aspirational, and visionary Budget. “Full marks for an economic strategy for improving social indicators and driving a strong rural economy. But I felt we lost the opportunity to revive the private sector investment cycle.”

Adi Godrej, chairman of the $5-billion Godrej Group, which has interests ranging from consumer goods and real estate to locks and furniture, emphatically stated that this “wasn’t a growth oriented Budget” and this reflected in the state of the stock market on Friday. “There could have been some stimulus given to the economy but I didn’t see much of that,” Godrej said. He added that the only sector that could see some positive impact due to the Budget was real estate.

Sitharaman said that under the Pradhan Mantri Awas Yojana, the government proposed to build 1.95 crore houses over the next two years. Moreover, buyers of affordable houses valued at up to ₹45 lakh will get an additional deduction (over and above the ₹2 lakh deduction in place for all home loan borrowers) of ₹1.5 lakh from their taxable income on account of interest paid on their home loans. “This will drive the much-needed urgency in sales and bring the fence-sitters back into the market soon,” said Surendra Hiranandani, founder and director of the House of Hiranandani.

Pawan Goenka, managing director of automaker Mahindra & Mahindra stated that the lack of fiscal room was the reason for the lack of any big bang announcements in the Budget. “The biggest reform was in the NBFC space and bank recapitalisation. This should ensure flow of credit to the retail consumer and also bring down the rate of financing, which should lead to a demand pull,” Goenka said.

One of India Inc.’s long-standing demands has been a lowering of the corporate tax threshold in the country. Sitharaman took a step in that direction by extending the lower tax threshold of 25% to companies with a turnover of up to ₹400 crore (from ₹250 crore) earlier. This, she said, would cover 99.3% of all companies in India. Godrej stated that the move didn’t mean much since though it covered a majority of the companies by numbers, it excluded those companies that earn the most revenue and pay the most tax. While speaking to a television news channel, Mazumdar-Shaw also said that she didn’t understand why the finance minister couldn’t cover the remaining 0.7% of companies under the lower corporate tax net.

The reason, perhaps, lies in the fact that the mathematics of the Budget isn’t clear yet. While the government had announced earlier that it would be spending ₹100 lakh crore on infrastructure over the next five years and the finance minister announced a slew of measures on which the government will be spending money (like ₹70,000 crore to be spent on the capitalisation of public sector banks), it isn’t immediately clear where the incremental funds for the expenditure are going to come from, as the growth forecast for tax revenue is muted.

One of the ways in which the government seeks to mop up revenue is by way of taxing the super-rich. By hiking the surcharge on income tax for this bracket of taxpayers, Sitharaman seeks to make the effective rate of taxation 38% and 42% on an income of ₹2-5 crore and over ₹5 crore, respectively. In response to this proposal, Godrej said that he is never in favour higher tax rates.

The other potential source of revenue could be a strategic disinvestment target of ₹1.05 lakh crore that Sitharaman has set before the government in fiscal 2020. Koushik Chatterjee, executive director and chief financial officer of Tata Steel, told a news channel that achieving this target appeared a tall order as only nine months were left in the financial year and executing a disinvestment proposal required several stages to be crossed, which is time-consuming.

“The divestment target set by the government is encouraging. However, it would have to walk the talk,” said Gopichand P. Hinduja, co-chairman of the Hinduja Group.

“It is good to note the Budget document clearly states that strategic disinvestment of select central public sector enterprises (CPSEs) would continue to remain a priority of this government and it will offer more CPSEs for strategic participation by the private sector. Our CPSEs hold significant intrinsic value and I firmly believe that their divestment will not only unlock that value but also boost their contribution to the growth of the Indian economy,” said Anil Agarwal, executive chairman of Vedanta Resources.

The other key reform that Sitharaman referred to is an increase in the extent to which foreign direct investment is permitted in sectors like aviation, media and insurance. “The NDA 2.0 Budget is a blueprint to boost economic growth in the country. The government has taken multiple steps to attract growth capital from global investors to build a new India,” Hinduja said.

Sanjiv Goenka, chairman of the Kolkata-based RP-Sanjiv Goenka Group, described the Budget as the “road map for a modern India based on inclusiveness and development”. He highlighted the finance minister’s proposals around developing a single national grid for power and gas, development of roads, access to water for all households, and National Common Mobility Card as moves that would facilitate ease of living for the common man.

The Budget also contained some provisions that dealt with the proposed simplification of labour laws in the country, which industrialists say will lead to ease of doing business. “We expect the proposed move to streamline multiple labour laws into a set of four codes will largely resolve the legacy issues and enterprise constraints with regard to the skilled and unskilled labour force in the country,” said Gautam Hari Singhania, chairman and managing director of Raymond Ltd. “The industry expects that standardisation of various labour-related definitions will effectively reduce disputes and bring uniformity in the wages across the states.”

A key measure announced by the minister in her Budget speech in Parliament on Friday was her directive to the Securities and Exchange Board of India (SEBI) to consider raising the threshold of public shareholding in listed companies to 35% from the existing level of 25%. This has several implications.

“The finance minister urging SEBI to re-look at and increase the minimum public float from 25% to 35% is something that will need to be carefully considered. If it is made applicable to existing listed companies, we estimate that this will perhaps impact close to 20% of all listed companies,” said Vivek Gupta, partner and national head of mergers and acquisitions and private equity tax at KPMG in India. “That will need substantial capital—which may not be readily available. Perhaps, SEBI may make this applicable for new IPOs initially only.”

The proposal, if implemented, will also give more teeth to minority shareholders of a company. It will lead to tougher checks and balances on the management of listed entities, which will ensure greater corporate governance.

House of Hiranandani

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Budget 2019: Good blueprint, but gaps remain, says India Inc.