Union Budget 2015 – Historical or Jugglery but convincing theatrics by a great lawyer

Continuing long drawn policies of congress to increase some and decrease some, let people understand and interpret the trick, year is over. Jaitly was at his oratory best, as always and a lawyer in him was convincing but, budget has little for common man.

Trick was try to cover for income tax exemption limit, keeping it unchanged, with some indirect benefit of Rs. 4,44,000. This will only happen if you save that much and Mr. FM, please tell who earn that much to save 4.44 L.

Increase in service tax to 14% will directly impact common person and service providers, as well.

Ditto as congress style here.

He has proposed few goodies like Rs. 1,000 crore additional allocation to the Nirbhaya fund, Pradhan Mantri Jeevan Jyoti Bima Yojana – Rs. 1 per day premium, Rs. 2 lakh coverage, Accident death risk – Rs 2 lakhs for a premium of Rs. 12 per year, Atal Pension Yojana – defined pension depending on contribution. Govt. will contribute 50 per cent of the amount and Housing for all by 2022 announced with 2 crore in rural areas, 5 crore in urban areas.

Emphasis has been on tax simplification, tax compliance and infrastructure spend which is the need of the hour. The government has rightly delayed the Fiscal Deficit target by a year given the private sector challenge to spend money on infrastructure. The priorities are very clear. The direct association of increased excise duty to be spend on road infrastructure shows good use of the increased revenue. The emphasis to financial inclusion through micro refinance augurs well for the rural educated. The various social schemes on medical, accident insurance and push to pension schemes are very well balanced.

From the rate cut point of view the budget is a little disappointing because they have not dealt with some of the fundamental issues of revenue deficit and still relying too much on divestments as the means of meeting the fiscal deficit. Inflation may continue to come down, but RBI may continue to go slow on rate cuts. We continue to expect rate cut of further 50 bps in 2015.

Secondly, this budget carries forward the government’s thrust on taking our economy towards global standards of governance by making it more investment-friendly, fairer and transparent, with its thrust on lower subsidies, better subsidy allocation through DBT and Jan Dhan Yojana, efforts to rein in black money, postponing GAAR and implementing a new bankruptcy law. In keeping with this theme, there is also increasing thrust on social security, with the increase in deductions for health insurance and pension. The surcharge of 2% on corporate tax is near-term negative for the markets, but is well-balanced with the medium term commitment to lower base corporate tax rate from 30% to 25%, simplifying the tax structure as well as sticking to the April 2016 deadline for GST.

There were much more expectations on infrastructure spending and more than all of this, the expectation on announcements for Banks as banks are in massive need for recapitalization and the budget fell short on those expectations but maybe those may follow soon. The capital infusion in the public sector bank of about Rs 8,000 crore is much lower than the expectation of Rs 12,000 crore plus. At the same time including large NBFCs in Sarfesi and removing the distinction between FDI/FII will help private sector banks.

The rationalization of capital gain tax regime for REITs is a positive move. This will help to make REITs more financially viable for Indian markets and further push introduction real estate investment trusts (REITs) in the Indian market. REITs’ introduction in the Indian market would not only offer the much-talked-about benefits but also many long-term benefits. If we look at the prevailing situation in the real estate industry, there is no fixed income instrument in the market which provides inflation hedged returns and capital appreciation both. And due to lack of this a significant amount of savings are channelized into gold and speculative real estate transactions. And do not form part of the saving pool and are treated as consumption as part of macro-economic indicators.

It is not close to the ‘Visionary document’ that people have been talking about. Overall, I would still say it is well balanced one. The levy on corporate taxation, rationalization of wealth tax, incentives by more expenditure towards infrastructure is all positives. But nowhere close to what markets were expecting.

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Sachin Iyer

I am a self‐learned digital executive, leader, strategist and trainer by profession and experience. I have rich experience as marketer, trainer, entrepreneurial evangelist and start up facilitator. I admire first generation of entrepreneurs and conducted more than 200 programs to establish startup ecosystem in Central India. I have worn many hats in my career, as a result, I have a unique ability to manage multi‐disciplinary projects and navigate complex challenges in the process. I have big ideas and I don't care who gets credit, I just like to facilitate. Drop me a line anytime, whether it's a collaboration, writing projects, skills training or just business - will love to hear from you - [email protected]

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