Managing director, Tata Steel
I rate the Union Budget FY12 as a balanced Budget and a Budget that is non-disruptive. The FM is continuing with the policies of the government since it came to power, keeping the focus on growth and inclusiveness. The Budget has to be seen in the context of the measures already announced and I am sure there will be several other measures that the government will announce progressively to ensure that the economy exceeds the 9% GDP level at the earliest. The governments target GDP growth rate of 9% and commitment to bring down fiscal deficit to 4.6% of GDP for FY2011-12 and 3.5% of GDP by FY2014 are statements that hold a lot of promise. There has been a positive change in the quantum of fiscal deficit for FY 2010-11, which was at 5.1% of GDP against the previous budget estimate of 5.5%. The FM affirmed his resolve to introduce DTC from April 1, 2012. However, as regards GST, the rollout, including constitutional amendment, is still in progress.
The increase in MAT rate, when it is felt that it is already high, would not have a beneficial effect on the industry, although this would be marginally offset by the reduction in surcharge. The imposition of MAT on SEZ developers will have an adverse effect on SEZs. The focus on infrastructure sector is in keeping with Indias insatiable need for enhanced infrastructure. Industries like steel, that have high capital outlays and also have high contribution towards creating infrastructure, should have been categorised as infrastructure industry too.
I also believe that there was an opportunity to develop Mumbai as an international financial centre in view of the decline of traditional financial centres in the West and elsewhere, but the measures expected to be announced in this regard fall short of what could have been done to capitalise on this opportunity. The various legislations proposed in 2011-12 and discussions to liberalise FDI policy are a positive. Foreign investment in mutual funds would enable greater inflows and greater participation in the Indian capital markets, but at the same time, this would also require careful monitoring. Funds provided for capitalisation of public sector banks, regional rural banks and NABARD are also strong positive measures to ensure financial robustness of these banks and encourage financial inclusion, though the banks are likely to require greater capitalisation to cope with increasing growth.
The increase in export duty on iron ore exports (lumps and fines) to a uniform rate of 20% with the intention of encouraging value addition within the country is a step in the right direction, but the exemption of duty on pellets also reduces the scope for greater value addition within the country. The value addition at the pelletisation stage is much less compared to finished steel stage and the aim should be to encourage steel production within the country, which would lead to more jobs, output and value addition within the country. It has been a persistent demand of the steel industry to include steel plants as infrastructure industry and it is hoped that this would be done. The FM may still consider this request of the steel industry.
Managing director & CEO , ICICI Bank
A growth-oriented Budget
The Union Budget for FY2011-12 is a growth-oriented Budget that seeks to build on Indias strengths and to address the challenges that we face. In line with this approach, the Budget seeks to build on our growth drivers through infrastructure and social sector development, address challenges of food inflation and of fiscal management and to promote inclusive growth.
The Budget recognises the long-term growth drivers for the economy and seeks to strengthen them further. Measures in this regard include continued focus on education and skill building to realise our demographic dividend and increased infrastructure investments through measures such as increasing the FII investment limit in corporate bonds, lowering of withholding tax for infrastructure debt funds, mechanisms to strengthen PPP and addressing environment-related issues. In addition to these, the Budget also recognises the challenges that the economy faces. With respect to controlling food inflation, the Budget seeks to invest significantly in agriculture to address the supply side issues. The Budget also seeks to address concerns around the fiscal situation and as such the government borrowing has not increased for the coming fiscal and the fiscal deficit has been brought down. It is also important to note that the process of consolidation has not come at the expense of reduced spending in important segments of the economy and, therefore, the consolidation process is expected to have a positive bearing on economic prospects in the long term. While seeking to achieve the above, the Budget also emphasises upon the need to promote greater economic inclusion with measures focusing on supporting lower income segments, the rural population and farmers and small businesses, as well as improving the efficiency of government spending on subsidies through direct transfers.
Overall, the Budget focuses on areas requiring significant investments, while seeking to take forward the process of fiscal consolidation. The priority accorded to achieving greater economic inclusion and addressing the challenges that we face will stand the economy in good stead as it reverts to a sustained high-growth path.
Chairman, Adani Group
A further impetus to the Indian economy
While the FM's announcements highlight the UPA governments continued focus on setting right Indias infrastructure, economic reforms and tax breaks to India Inc remain un-addressed. The FM has tried his best to balance the earnings and spending of the UPA government to fund its ongoing development agenda. He has also walked the tightrope of managing inflationary pressures and containment of fiscal deficit.
The FM has nailed the crucial issue of infrastructure funding by announcing several measures to enhance capital inflow in Indian infrastructure. The decision to step up infrastructure funding via a vibrant debt market is a welcome step and a right decision to resolve funding bottlenecks in our country. A robust corporate bond market will give much-needed fillip to strengthen infrastructure funding. We also welcome the doubling of the FII limit to $40 billion in corporate bonds, which is a major shot in the arm of India Inc. Infrastructure funding in India is a deficit that perhaps poses the biggest challenge for the economy and its aspiration to achieve a double-digit economic growth over a long period. But, the FM seems to have left untouched the constant issues of lack of clarity on policies and long-term taxation that are plaguing the sector since several decades.
The governments initiative to raise the domestic palm oil output to 3,00,000 mt per year by infusion of R300 crore is a welcome step and will help enhance local production of palm oil. A marginal increase on MAT from 18% to 18.5% for corporates and inclusion of SEZ developers under the MAT purview is not in the interest of India Inc, as SEZ were set up to sharpen competitive edge to the industry. At the time of formulating the SEZ Act, this was discussed in detail and it was decided not to levy MAT from SEZ developers and units in SEZ. This change midway has surprised many investors. However, removal of excise duty on equipment for power generating plants under the UMPPP is a relief. This measure could have been extended to new power generation units that employ environment-friendly super critical technology. I feel the Budget will provide further impetus to the economy and the FM's efforts need to be lauded in the context of the current political and economic scenario.