BS JURY GIVES ITS VERDICT: 7.5/10

Several of our jury members refused to rate the Budget publicly. But privately, they provided Business Standard with their assessment. The composite jury rating here does not reflect the views of any single individual.

S B Mathur
Chairman, LIC

It is a good Budget. It focuses a lot on urban and rural infrastructure, giving institutional players like us greater opportunity for fund deployment. Stock prices could well go up as investors come back with a vengeance.

The increase in sectoral cap will be a boost to sectors such as insurance, telecom and aviation.

There may not be an immediate impact in the insurance sector, since essentially it will be a question of foreign capital substituting Indian capital.

The insurance sector has, however, been hit in terms of the 10 per cent service tax on insurance premium. It is yet to be clarified whether the tax will also be imposed on existing policies.

Insurance companies will also see a higher outgo as many absorb the service tax on agency commission. The issue was raised the year before last, but later rolled back.

The Budget has, however, remained mum on the rolling back the earlier tax exemptions on single premium and short-term policies.

Deepak Parekh
Chairman, HDFC

Considering the fact that he had limited time to prepare, the finance minister has done a remarkable job. He is fair, transparent and has taken care of all consititutenies. Naturally, the emphasis was on rural credit, agriculture, health and education.

He is bold enough to raise the FDI limit in three sectors. Both insurance and telecom need huge capital and the lift in the FDI limit will help these sectors.

The abolition of long term capital gains tax on securities is a big relief. The turnover tax will impact the speculators and day traders but the long term investors and FIIs will benefit.

I have reservations on two issues. There is no emphasis on urban housing which generates lot of employement. Secondly, the FM has spoken about benign interest rates.

If this is the case, the administered rates should have been cut. At 8 per cent, the PF and other rates are out of sync with the overall interest rate matrix. Senior citizens should get higher interest rates.

Anand Mahindra
Vice chairman & MD, M&M

Diwali seems to have come early for those involved in the agricultural and road transportation industries.

As I write, it is not yet clear whether the inputs will also be excise free. Even so, the excise exemption for tractors should lead to a significant expansion of demand in the industry.

Bolstering that prognosis is the doubling of agricultural credit, and the fillip given to rural water conservation and other infrastructural projects. All in all, just what the doctor ordered for the ailing farm sector.

The auto industry might have been hoping for more direct sops, but the combination of a higher deduction for research & development, a stable rate of peak import duty, and a reduction in import duty on steel will be positive for domestic automobile companies. We should benefit by these measures.

The most important achievement, however, is the pruning of the projected revenue and fiscal deficits.

This will revive the global interest in the Indian economy.

Ajay G Piramal
Chairman, Nicholas Piramal

It is heartening to note that the overall direction of the reform process has been maintained. The growth plan is encouraging. Setting up of an investment commission should bring in focus to the government's efforts at increasing investment and simplifying the FDI approval process.

The liberalisation of the FDI ceiling on telecom, civil aviation and insurance; and the infrastructure fund creation for airports, seaports and tourism are good steps in this direction.

Measures proposed for the rural sector are right. It is heartening that the government is willing to use PSU divestment proceeds to fund social sector initiatives.

I would have liked a clarification on the weighted income tax deduction status for R&D spend of pharma firms beyond March 2005. Indian pharma companies are at a crucial point of evolution, and the continuation of this incentive will assist them to allocate higher funds for research.

Overall, the finance minister has made a commendable effort, given the fact that he has only eight months available for this year.

Adi Godrej
Chairman, Godrej Group

The Union finance minister has presented an excellent Budget. A major emphasis has been laid on rural and social development, as expected.

If well implemented, the various schemes which lay emphasis on basic amenities like primary education, drinking water, basic health care and job creation in rural India will lead to the regeneration of the rural economy.

I also feel that this strong emphasis on rural development will definitely accelerate consumer demand. This will in turn help build a virtuous cycle in terms of greater revenue and thus greater availability of funds for investment in rural development. It will benefit everybody from the farmers to companies.

The minister has shown fiscal rectitude in his proposals this year.

By widening the service tax net and increasing the service tax rate from 8 to 10 per cent, he will raise considerable new revenues and contain the revenue deficit.

On the whole, the minister has corrected most of the industry specific aberrations impeding growth.

Sanjay Nayar
CEO, India, Citigroup

This is a pragmatic Budget, which is underlined by measured steps that are in line with the Common Minimum Programme (CMP) of the government.

The increase in foreign direct investment limits in telecom, civil aviation and insurance signals a clear focus on encouraging investment into infrastructure and technology in a calibrated fashion.

The finance minister clearly has the pulse of the economic drivers of the future given his focus on investing in infrastructure, rural economy, education, health and water management.

The explicit statement on fiscal deficit reduction is a welcome step. The proposal to extend the deadline for reduction of revenue deficit shows a more realistic approach to the issue.

While the 4.4 per cent fiscal deficit target for the current year is still on the higher side, we feel that the commitment to long-term targets should make investors more comfortable.

The minister is focusing on making states accountable for fiscal responsibility management while empowering them with higher revenue allocations and access to funds.

A K Purwar
Chairman, SBI

The finance minister has clearly focused on driving investment and growth in the economy. There are significant positives for the market.

The increase in FDI cap in civil aviation, telecom and insurance and the rise in FII investment limit in debt market are welcome initiatives to broaden and deepen the capital markets.

The increase in government equity support to PSUs in power, telecom, rail, road, petroleum, coal and civil aviation will help attract private investment and bank funding in these areas, which in turn will have a positive effect on upstream and downstream industries.

The new initiatives for infrastructure envisage closer public-private partnership with greater focus on airports, seaports, tourism, desalination plant for drinking water and rural housing.

The Budget is pragmatic, balanced and growth-oriented. Overall the finance minister has presented a pro-growth, rural friendly Budget that will reinforce the economic resilience with its strong backward and forward linkages.

Kumar Birla
Chairman, Aditya Birla Group

It is a good balancing act. Particularly commendable is the finance minister's eyes for social equity and fiscal prudence. He is bringing down the revenue deficit by 1 per cent of the GDP and fiscal deficit, too, has come down to 4.4 per cent. His focus on education, health and higher spending on defence will augur well for the country. The planned expenditure has gone up by Rs 10,000 crore.

However, there could have been more focus on the infrastructure sector. Another slightly negative factor is the imposition of transaction tax on trading of capital market instruments. But the abolition of long-term capital gains tax on equity is a huge positive.

From the point of view of foreign investors, the big announcement is the hike in foreign direct investment (FDI) in three critical sector: insurance, telecom and aviation. This is an extremely positive signal for the market.

This Budget will be effective for seven months of the fiscal year. I am sure that once the rural economy gets the booster dose, the entire economy will shine.

Hemendra Kothari
Chairman, DSP Merrill Lynch

The Budget 2004-05 is in line with the expectations that the finance minister will deliver both a pro-growth and pro-reform Budget.

The thrust areas of the Budget are infrastructure and rural sector spending, with planned expenditure expected to rise 20 per cent. In spite of this increased expenditure, fiscal deficit remains under control at 4.4 per cent of the GDP.

In terms of reforms, we are positively surprised that FDI limits in telecom, insurance and civil aviation have been hiked, while foreign investors will welcome the abolition of long-term capital gains tax.

The introduction of turnover tax of 15 basis points was higher than we expected and in the short term may be viewed negatively by traders and affect market liquidity.

Overall, investors will be comforted that the new government is continuing the reform process while maintaining fiscal discipline.

Agrarian reforms will leave a positive impact on many agriculture-related industries. Various welfare measures aimed at the underprivileged are the most welcome feature of the Budget.

Nandan Nilekani
CEO,president & MD, Infosys

We welcome the focus on social sector and agriculture in the Budget. Liberalisation has marginalised a large percentage of our population from the benefits of an open economy as they lack the skills to take advantage of the same.

We similarly welcome the focus on children's education, national mid-day meal scheme, basic health care, drinking water and the group health insurance scheme. The education cess is a welcome move.

But I must say that this Budget, however, lacks the required focus on infrastructure.

Then there is one area where the Budget stands out. It is in reducing the revenue deficit to 2.5 per cent of the gross domestic product and reduction in the deficit. This should improve the fiscal condition and release funds for development in the future.