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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Prabhu’s new script for Indian railways, mantras of change


Suresh Prabhu is certainly not populist but he is pragmatic in his entire approach and it was evident when he presented his maiden Railway budget.

He took a very serious approach to bring about 360 degree change in management practices and better passenger experience. He boldly took wrath by not announcing any new trains nor did he plan to lay new railway lines but, announced high speed corridors and faster trains to drastically reduce intercity travel time. He proposed passenger-friendly proposals like quick ticketing, lower berth quota and bio toilets, definitely good initiatives for common travellers. One of the major announcements of 5-minute ticket for passengers without reservation would be a major hit. Prominent step taken by him for youth is to cover 400 stations WiFi.  Prabhu has unveiled what he called “four goals, five drivers and 11 thrust areas” to end the “vicious cycle” of underinvestment in Indian Railways. The railways short-term aim would be to deliver its best financial performance in last one decade.

He seems to be committed on his four major goals:

  • Sustainable improvement in customer experience.
  • Making railways a safer means of travel.
  • Expansion of capacity and modernising rail infra.
  • Attaining financial sustainability by creating large surpluses for capacity expansion and replace depreciating assets.

The new reforms will help railways increase its rail network to 1.38 lakh kilometers and freight traffic from 1 billion tonnes to 1.5 billion tonnes, Mr Prabhu said. However due to high freight tariff there has been decline in freight traffic over last few years and may pose some radical changes here.

His innovative mind-set was reflected when he put forth the five key drivers, which include:

  • A five-year action plan to transform railways.
  • Partnerships with states, PSUs, multilateral agencies and private sector for ensuring financing and last mile connectivity.
  • Raising of Rs. 8.50 lakh crore over five years.
  • Revamping of management practices.
  • Setting standards of governance and transparency.

Mr Prabhu’s appointment as Railway Minister last November triggered hopes of radical change in a ministry long regarded as a populist gravy train. Few months in office, he has made some out-of-the-box decisions, reported in different sections of the media:

  • The World Bank was asked to make a presentation to the ministry, outlining the experience of other countries in transforming their railway systems.
  • He has introduced technology, including a mobile application for ensuring the safety and security of women passengers in Mumbai suburban trains.
  • He has also identified seven key ideas to increase the poor passenger security record of the railways. One is called “”Mahila Vahini”, a specially-trained female force to check crimes against women in railway premises and trains.
  • A team is working on a mechanism for immediate evacuation and shifting of injured persons to hospitals so as to save precious time and human lives. The recent spate of accidents on trains, including fire in coaches and derailments, highlight the need for speedy action in the aftermath of an incident.
  • He has planned his priorities to improve passenger services, installing chemical toilets, cleanliness of trains and stations, and better quality of food, including by private caterers, the latest being Domino pizzas.
  • He has formulated a six-member task force to generate advertising revenue by leveraging spaces in coaches, wagons, trains and railway stations.

Mr Prabhu, a Chartered Accountant, has pursued two doctorates simultaneously, one on Public Finance from Mumbai University and the other from Berlin University on Climate Change.

According to me this is an ideal & dream budget, which speaks for innovation in Railways providing complete new outlook. But there are lot of challenges to implement these idealistic practices and I hope Prabhu, otherwise quiet person, will accomplish what he said.

We must feel proud that:

  • Indian Railway is world’s third largest railways network.
  • The full track length of Indian Railways can easily circle the equator one and a half times.
  • The Indian Railways cover a large distance equals to three and a half times the distance to the moon.
  • Indian Railways is the 9th largest employer in the world. Providing jobs for 1.3 million people, the railway is India’s largest single employer.
  • It carries more than 25 million passengers each day.
  • We might complain about IRCTC website taking a long time to open, but the interesting fact is that the website gets close to 12 Lakh hits per minute.

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Budget 2014 New Thesaurus for Entrepreneurs

Budget 2014 New Thesaurus for Entrepreneurs.

It was a pleasant surprise that Indian finance minister, for the first time, is talking about words like startups, incubators and accelerators thus we can say – Budget 2014 New Thesaurus for Entrepreneurs.

A nationwide ‘District level Incubation and Accelerator Program’ would be taken up for incubation of new ideas and providing necessary support for accelerating entrepreneurship. Such accelerator programs will allow our promising start-ups to scale fast, secure early funding, and grow to excel on the global stage.

 Another interesting thing which he referred to was setting up of venture capital fund of Rs. 10,000 crore for startup firms to act as a catalyst to attract private capital by way of providing equity, soft loans and other risk capital for startup companies. Also, the assurance on retrospective taxation will help improve the investment confidence.

The FM has to earn the creditability of this position as in past budgets a Rs.5000 crore "Indian Opportunity Fund" and another Rs.5000 crore "India Innovation Inclusive Fund" were announced. But they could never become a reality.

Provision of Rs.100 crore for Start-up Village entrepreneurship for the rural population, and Rs.200 crore for scheduled caste entrepreneurs was also announced. A special focus on software startups with allocation of Rs. 500 crore is been provisioned.

He also suggested appointing a committee with representatives from the Finance Ministry, Ministry of MSME and RBI to give concrete suggestions in three months.  He proposed to establish a Technology Centre Network to promote innovation, entrepreneurship and agro-industry.

It is viewed by the entrepreneurs that the Union Budget 2014 reflects optimism for the Indian SMEs in the coming year. With conducive financial schemes and budget allotments planned in their favor, SMEs are bound to make a substantial contribution to the country's GDP. The efforts undertaken to promote entrepreneurship are truly a positive sign for the economy.

We were striving hard, since long, to create a positive entrepreneurial ecosystem and government support to accomplish it. This was a great encouragement to all the stakeholders engaged facilitating entrepreneurship in India.

It will create a favorable ecosystem for the start-ups to flourish. The revision of the MSME definition for high capital ceiling will enable the SMEs to get higher credit from the market, in turn helping them to grow and expand. Additionally, the sanctioning of Rs. 200 crore for development of 6 more textile clusters will provide a platform for SMEs to share best practices, pool resources and grow their enterprise fast, along with generating employment opportunities, thereby affecting the growth of the Indian economy in a positive manner.

Implementation of all the provisions is something which will need lot of planning because handling of these funds will require a proper framework and involvement of experienced investor networks can play pivotal role, if involved in the process.

But we Indians are always optimistic and firmly believe that we have chosen right people to efficiently manage this great country. The application to work, fast decisions and commitment of this government is visible and must be appreciated.

Let us hope that a startup culture, as seen in the US and some other western countries, will catch up in India too.

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