Finance Minister Arun Jaitley today presented the budget in Parliament today and indicated that the government was tilting in favour of villagers and farmers in a major way. He announced a slew of proposals in his speech among which was the one that gave a major thrust to agriculture, Finance Minister Jaitley announced a whopping Rs 1 lakh crore hike in the credit target for the next fiscal to Rs 10 lakh crore as part of the government’s efforts to double farm incomes in the next five years. Here are the reactions from KPMG India experts on various aspects of the budget:
Girish Vanvari, Head of Tax, KPMG in India: Budget 2017 sticks to fiscal prudence with a fiscal deficit of 3.2% whilst balancing enhanced spending in several socio economic schemes and different aspects of economic development. There is some cheer for individuals as tax rates for income between 2.5 lakhs to 5 lakhs has been reduced from 10% to 5% . However an additional 10% surcharge has been introduced on income between 50 lakhs and 1 crores which is a dampener for high networth individuals. MSME with turnover upto Rs 50 crores will benefit from lower tax rate of 25% and there are some concessions to boost the real estate sector. The trust of the budget is to enhance the tax base and move towards digitization through several amendments in the act. No change in capital gains tax regime for listed stocks and clarification on non-applicability of indirect transfer rules to FPIs and AIFs will be a big relief to the investors and could trigger an immediate rally on the stock markets. One can argue that the Budget could be more ambitious at the cost of fiscal prudence. However, in global macroeconomic backdrop, the calibration in the Indian economy post demonistation and much awaited GST which is now on anvil, Budget 2017 is stable fine balancing act, with fiscal prudence, directional spending and no surprises on the taxation front which should lead the country to a sustainable growth path.
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Dr. Jaijit Bhattacharya, Partner – Strategy and Economics, KPMG in India on Infrastructure sector: Budget 2017 has focused on infrastructure, including digital infrastructure, increasing private investments, increase consumption and strengthen social sector and safety net, including health and education. The key feature of the budget appears to be several declared deadlines for outcomes such as elimination of TB by 2025, removal of unmanned crossings in railways by 2019 etc. This makes the budget more accountable and it’s impact and progress can be tracked over a period of time. The budget appears to be able to achieve its stated objectives and would help in growth of consumption and infrastructure development.
Statement from Nilaya Varma, Partner and Head, Healthcare, KPMG in India: Many of the targets set by the Government for healthcare is very welcome and so is the focus on wellness, creating more clinical staff and leveraging existing assets. However, we need to see what is the real extra allocation for making these announcement happen… would have appreciated comment on plan for universal healthcare and infrastructure status.
Statement from Nilaya Varma, Partner and Head, Government and Healthcare, KPMG in India: Model Contract Farming Law, if designed well, has the potential to impact the entire farm value chain including better realization to farmers, bring new investments in farm infrastructure and reduce middlemen.. Incentivization needs to be built for states to implement this fast in letter and spirit.
Statement from Neeraj Bansal, Partner and Head of Real Estate, KPMG in India on Infrastructure status to affordable housing: By granting Infrastructure status to affordable housing, the Government acknowledges that affordable housing industry is an important driver of the economy. Affordable housing developers will now be eligible for several Government incentives, subsidies, tax benefits and most importantly institutional funding. The status could also mean that the Government may release land specifically for affordable housing development in central locations of major urban centres in India.
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Statement 2 from Neeraj Bansal, Partner and Head of Real Estate and Construction, KPMG in India: FM has reduced the holding period for land and building from 3 years to 2 years for long-term capital gains purpose. This would help improve invest ability in properties in comparison to shares and stocks where the period is 1 year.
Statement from Santosh Kamath, Partner and Head of Renewables, KPMG in India: “The push on Phase 2 of the national solar programme of 20,000 MW reiterates the Government’s commitment to this sector. The move to expand solarising of the railway stations also sends an encouraging signal to rooftop and distributed solar.”
Statement from Biswanath Bhattacharya, Partner, Infrastructure and Government Services, KPMG in India: The set of initiatives announced seem to acknowledge the challenge that Railways is losing share in both freight and premium passenger services to alternate modes of transport, and hence an integrated approach to improving safety, cleanliness and passenger comfort, and higher levels of service to freight customers through end to end services have been introduced in this budget. The introduction of accounting reforms will also facilitate better management control systems, to track performance improvement, of the Railways.
Statement from Narayanan Ramaswamy, Partner and Head of Education and Skill Development, KPMG in India: The focus on Education and Skill Development in this budget looks at best cursory and customary. There are some bright spots with the set-up of Innovation fund for local innovation in school education, more colleges will be identified for autonomous status and a national testing agency for all entrance exams. There are some announcements of new schemes for leather and footwear. The outlay is not known for these schemes. The 4000 crores for SANKALP targeting 3.5cr youth, Rural Mason training scheme targeting 5lakh youth by 2022 are encouraging. Given the mammoth requirement for skilling and urgency of the need, it is disappointing to see this budget virtually ignoring the support and encouragement needed for skill development and vocational education.
Statement from Narayanan Ramaswamy, Partner and Head, Education and Skill Development, KPMG in India: It is encouraging to see the budget seems to have brought the cause of underprivileged to the focus again. The 500cr for ICDS scheme, 20,000cr allocation to NHB for re-financing affordable housing are much needed. The allocation of 1,84,632crore for women and child reform and 52,393crores for SC, 31,920cr for ST all point towards the clear intention of taking all sections of people along in the economic growth. FM has also repeatedly spoke about outcome based monitoring and allocation and it is very important that this approach is followed in allocation, monitoring and evaluation of the budgeted money in these areas.
Statements from Anish De, Partner and Head of Oil and gas, KPMG in India: Extension of MAT credit carry forward period to 15 years is a positive for all infrastructure players. Especially considering the large forthcoming investments in Oil & Gas, the measure will serve to de-risk some of the infrastructure projects in the sector. Reducing the basic custom duty in LNG to 2.5% will make it more affordable for various applications. Industrial and city gas consumption will benefit. Will further climate goals under COP 21. No announcement on oil industry development cess in main budget speech. There was an expectation that it be reduced. Two additional strategic reserves announced. This is of considerable importance for the energy security of the country and also for the oil industry.
Statement from Amarjeet Singh, Partner – Tax, KPMG in India: The proposed dismantling of the FIPB indicates that almost all sectors attracting FDI will move into automatic approval route. However, what needs to be ensured is that the balanced sectors, which are not part of the automatic route, are able to get clearances under a single window mechanism.
Statement from Nilaya Varma, Partner and Head, Government Services, KPMG in India: The proposal for creating 5 tourism zone is welcome, something I have advocated for a long time. It would allow the government to focus limited central investments into our best tourist destination thus allowing world class experience. We believe this will ensure large inflow of foreign tourist. Despite India’s potential, we get a very meagre inflow of foreign tourists.