The Union Budget 2018-19 has predominantly focused on revitalising the rural economy with the thrust on the healthcare, agriculture and infrastructure sectors. But there are a couple of disappointments in the Budget which will dampen the investment scenario in the country.
The Union Budget 2018-19 has predominantly focused on revitalising the rural economy with the thrust on the healthcare, agriculture and infrastructure sectors. But there are a couple of disappointments in the Budget which will dampen the investment scenario in the country. We were expecting more in terms of boosting the investment cycle and overall demand in consumption in the country.
The Budget has been disappointing mainly on account of couple of aspects — firstly the 10% long-term capital gains tax on sale of listed securities, and the introduction of tax on distributed income of equity oriented mutual funds is disappointing. While LTCG is a grandfathering concept as all profit earned up till January 31, 2018 are exempted, but it will impact the overall investment environment and sentiment of investors in India.
The FM also disappointed the large corporates as they have not lowered corporate tax for large firms as promised. Earlier the FM had assured of reducing it but surprisingly it has been done only for small and medium enterprises having turnover of not over `250 crore. Already the capital expenditure cycle in the corporate sector has witnessed a slowdown over the last few years and bringing down the corporate tax would have helped. Corporate tax of large firms is at 35% while for smaller ones it is 25%. Countries like the US and the UK have also reduced corporate tax, and to compete globally reduction of corporate tax would have helped the large companies.
In the housing sector too nothing much has been announced to trigger growth. Throughout last year, steps surrounding affordable housing were the mainstay from the perspective of the real estate industry. The affordable housing fund under National Housing Bank has been created as a part of priority sector lending. But there has been a silence in the Budget on stimulating mainstream real estate demand.
The only respite is the continued focus on rural and infrastructure sectors which are likely to drive overall growth of the country. Government’s focus to boost rural economy will help FMCG firms and will also help Godrej Agrovet to witness growth.
By Adi Godrej