In absence of any direct benefits for manufacturers and service providers, a possible boost in consumption remains the only takeaway for the India Inc. Tabled by the interim finance minister Piyush Goyal today, the interim budget is an out-an-out pre-election budget meant to lure voters, they said.
A bunch of corporate leaders had gathered at central Delhi’s Le Meridian Hotel, at least half an hour ahead of the scheduled time of 11 AM. Seated in front of a giant screen, put up for the executives, senior officials and media persons under the banner of industry body Confederation of Indian Industry (CII), most corporate leaders wore a somber look.
The who’s who of the corporate world – Hero Enterprises’ chairman Sunil Kant Munjal to ITC Hotels’ chief executive Dipak Haskar – watched Goyal’s flamboyant delivery mostly in silence. Except a few moments, when Goyal’s attention turned towards unusual subjects like the recently released movie ‘Uri – The Surgical Strike’.
About two hours later, by the time the FM’s budget speech got over, their mood had hardly changed.
From income support to the poorest of farmers, aimed at benefitting 120 million of those, to a tax rebate for people earning up to Rs 5,00,000 a year – aimed at the lower-middle class, benefits were poured on the common voters. However, the FM sighed away from offering any good news to the country’s largest tax paying pool – the corporates.
That, however, did not surprise the honchos though. According to most, the budget in fact exceeded their expectations – given the fact not many were expecting any benefits for the corporates and no adverse tax has been proposed for the ultra-rich and/or the high earning firms.
“Of course it is a pre-election budget and was meant to woo the aam aadmi”, said a CEO of a leading manufacturing company.
Chandrajit Banerjee is the Director General of CII said, the proposed sops will boost consumption that will consequently help the economy and the industry.
Corporate leaders, gathered at the Federation of Indian Chamber of Commerce and Industry (FICCI), felt no different. No tinkering with the corporate tax rate was of relief for them.
Rajan Bharati Mittal from Bharti Airtel said, “The tax rebate for those earning upto Rs 500,000 will result in more consumption of white good and durables.”
They were also relieved that all tax assessments will be done online without any direct interface with the tax officer. The finance minister announced that all tax will be assessed within 24 hours of filing it and this will be done online without the tax authority actually meeting the assesse. They call it a ‘significant upgrade’.
Naina Lal Kidwai, CEO and country head of HSBC India, said, the proposal to extend the benefit of no tax for notional income on unsold property upto two year from the existing one year is a relief to developers.
Another point that touched corporates present at FICCI house in the capital was proposed income support to farmers, given the scheme will provide direct benefit transfers in installments to the lower strata of the rural households.
Dev Chatterjee writes from Mumbai
Budget to help other India
With General elections few weeks away, the focus of the Narendra Modi government is to help the poor and marginalised who have been left behind and failed to get any benefit from the government policies. The much needed relief to the small farmers and tax sops to the salaried class upto Rs 5 lakh will help to woo the voters, say corporate leaders.
While there was no tax incentives for the large corporates, CEOs said the rationalisation of the Goods and Service Tax by the GST council announced outside of the budget has helped matters. “The finance minister has hit a volley of sixes, a victory for farmers and middle-class, two major pillars of our economy. Balancing both hosh and josh, the budget will stimulate consumption demand and rejuvenate lives in rural areas,” said Harsh Goenka, Chairman of the RPG Enterprises.
Anand Mahindra, Chairman of automobile major, M&M said he was earlier bracing for a populist, profligate budget driven by ‘election panic”. ”I am just grateful that the reliefs to the key middle class and farmer segments were delivered in a measured way without risking bankruptcy of the economy. This was a controlled, pump-priming exercise,” said he.
CEOs said the distressed farmers will stand to benefit by several measures announced today. The cash support of Rs 6,000 per year to small farmer is a good beginning to increase their income and lift them above poverty level. “However, more money supply into the economy should not lead to inflation and other adverse effects,” warned Ashok Hinduja, Chairman of Hinduja group. “The higher allocation to defence and capital expenditure should give a boost to manufacturing industry and job creation. The fiscal deficit is stated to be 3.4% of GDP which is slightly higher than the figure expected by the global rating agencies. But if the higher deficit leads to creation of more goods and services, it will not affect the economic growth,” said Hinduja.
Prashant Ruia, director, Essar group said the budget will have a positive impact on investors, since growth in consumption will result in growth across the industry sectors, including the ones they are in. “The incentives in direct taxes is encouraging not only for the middle class, but also for industry since it will lead to higher disposable incomes and, in turn, increase consumption. By the same logic, even the farm sector stimulus will benefit industry in the long run. All these will collectively have a huge impact on interest rates, which should see a reduction in the coming years,” Ruia said.
The increased allocation to defence to Rs 3 trillion is encouraging for the industry - especially in the defence related sectors. “We hope that “Make in India” in defence will result in greater role for the private industry in this critical sector of the country’s economy. The thrust on MSMEs is also welcome as they have an important role in supporting large industries, achieving higher levels of indigenization and generate higher employment in the country,” said Baba Kalyani, CMD of Bharat Forge Ltd.
Raising the personal income tax slab limit from 2.5 lakh to 5 lakh, and raising the standard deduction for salaried employees, will increase disposable income for middle and salaried classes and drive demand for mass products, CEOs said. "But the need of the hour is clearly more productive job creation and gainful employment to meet the needs and aspirations of Young India. We hope to see this enabled through investments in small and medium enterprises and infrastructure investments, which seem to have slowed down, said Vivek Gambhir, Managing Director and CEO, Godrej Consumer Products.