Budget 2021: Budget shift to asset monetisation for revenues, rather than raising taxes, gets industry thumbs-up

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February 1, 2021 8:55 PM

Union Budget 2021: Increasing taxes, the traditionally preferred option for revenues, may have been inappropriate given the impact of the coronavirus pandemic, they said.

budget 2021Emphasis of the government in recent years has been to reduce tax litigation.

Reliance on divestments and asset monetisation for resource mobilisation in the Budget was welcomed by industry players on Monday, calling it as the “biggest takeaway” from the Budget document.

Increasing taxes, the traditionally preferred option for revenues, may have been inappropriate given the impact of the coronavirus pandemic, they said.

In the Budget, Finance Minister Nirmala Sitharaman pegged the divestment target at Rs 1.75 lakh crore. She assured that pending stake sales in companies like Air India and LIC of India will be carried out during the next fiscal and also promised to unlock value by monetising assets like highways and transmission lines.

“An aggressive disinvestment plan and the monetisation of land and other governmental assets, if effectively executed, will greatly help balance the fiscal equation,” Arun M Kumar, chairman and chief executive of KPMG in India, said.

He added that this is a preferable approach to increasing taxes at this juncture as enterprises and individuals should instead have the resources to spend and as a result create buoyancy in the economy.

Sandeep Upadhyay, managing director for infrastructure advisory at Centrum Capital, also welcomed the shift in approach to raise capital through a national asset monetisation pipeline.

“This could be the biggest takeaway from the Budget Speech today and it has the potential to improve much-needed visibility towards identifying the sources of funds which was perhaps missing in the past,” he said.

Terming the move as a “master stroke”, Edelweiss Asset Management Chief Executive Hemant Daga said the Budget has strategically opened the doors for global capital to fund the growth needs of India. Monetisation of operational assets like roads, airports and transmission towers is a clear win-win for both the government and investors, he added.

Daga also said there is a considerable interest from global pension funds and insurance companies for these assets and the long-term, inflation-indexed cash flows make this space attractive for patient institutional capital.

PwC Chairman Sanjeev Krishan said privatisation, substantial increase in FDI in the insurance sector and other announcements around asset monetisation are “progressive measures”. These can have a far-reaching positive impact on creating a conducive ecosystem for business and help address some legacy issues.

“The FM had an unenviable job of striking a balance on the fiscal deficit front without altering tax rates to fuel economic growth, and must be complimented for having achieved it,” he said.

Srini Sriniwasan, MD of Kotak Investment Advisors and the chair (credit and special situations council) at industry lobby IVCA, said the thrust on infra spend and the proposed ARC (asset reconstruction company) route to sell NPAs to AIFs (alternative investment funds) are game-changing opportunities for the AIF industry.

Tax Connect Advisory Partner Vivek Jalan said the emphasis of the government in recent years has been to reduce tax litigation. “The relief to senior citizens, reduction in time for reopening of assessments period to 3 years and proposal to constitute a dispute resolution committee for taxable income of Rs 50 lakh and disputed income of Rs 10 lakh are some steps that will immensely help individuals.”

Aarti Khanna, founder and CEO of AskCred.com, said the Budget does have some heartening initiatives and proposes to set up an ARC for NPA management. “This is a welcome step to resolve the bad debts of the banking sector and give a boost to lending and economic activity..”

Punit Modhgil, chief research officer of Octane Research, said MSME redefinition and incorporation of start-ups have been made easier. “Enabling one-person companies is a huge step forward for encouraging start-ups in India as it provides more flexibility for entrepreneurs.”

Manish Chandra, founder and CEO of RailRestro, said, that during the Union Budget 2021, Finance Minister Nirmala Sitharaman has announced a record-high allocation for the development of the railways sector in the upcoming fiscal. “It is heartening to see the Government prioritizing on significantly increasing the capital expenditure for Railways.”

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