Higher FDI limit will be productive

Written by Adi Godrej | Updated: Jul 11 2014, 18:04pm hrs
Finance Minister, Jaitleys Budget was a practical and pragmatic exercise in overcoming the difficulties the country has been facing over the last few years both in terms of investments and economic growth.

Although there were no big-bang announcements and changes, all the announcements were pragmatic and growth-oriented. The fiscal deficit targets were sensible.

The announcements on GST and avoiding retrospective taxes were good. Increasing FDI limits in defence and insurance will be very productive.

Linking MGNREGA expenditure to productivity improvements in rural areas is a good development.

The emphasis on affordable housing and development of new townships in the outskirts of major cities will be useful. The provision on REITS will be good for the real estate industry.

The new investment allowance will lead to encouragement in investments but it is also important that the Minimum Alternate Tax be reduced before the Budget be passed for it to be really effective.

The changes in the FII tax treatment will be very good for the stock market. Overall, I feel it is a Budget that was an excellent exercise of the new government within weeks of it being sworn into office.

The problems many industries had on anomalies in import duty and excise structure have been addressed. This will certainly help in accelerating industrial growth.

The provision reducing the investment allowance for new manufacturing units from `100 crore to `25 crore is very welcome.

However, many companies will not be able to get this benefit and therefore may invest less because of the Minimum Alternate Tax (MAT). Before the Budget is passed the finance minister needs to reduce the MAT rates considerably. Another damaging proposal in the Budget is the increase in the effective rate of dividend distribution tax from about 18% to about 20%.