Budget 2016: Reactions

The Union Budget 2016 continues to rightly focus on rural and infrastructure sector. The planned investment in these two critical sector will not only create jobs but also give impetus to demand generation and economic growth.

The government’s proposal to create e-market for our farmers through ‘Unified Agri Marketing platform’ is very bold and forward looking and will positively impact country’s farmers. We will continue to strengthen our Direct Farm programme to complement government vision to make a difference to the lives of our millions of farmers.

The continued focus on ease of doing business, as highlighted by  Finance Minister Arun Jaitley augurs very well for the industry. Recognition of retail trade as the largest service sector employer in the country and proposed focus to simplify the regulations for retail sector is very laudable. The Retail sector in India is currently the hotbed of economic growth. The sector has made noteworthy progress over the last two decades, with rise in disposable earnings, shift in youth populous and an attitudinal shift in consumer preferences. India is a domestic consumption driven growth story and therefore this support & encouragement to the retail trade will surely further drive consumption, which in turn will help manufacturing sector and job creation.

The decision by the government to allow up to 100% foreign direct investment (FDI) through FIPB in marketing of food products produced and manufactured in India is very progressive and will help in reducing wastage, helping farm diversification and encourage industry  to produce locally within the country. This far reaching reform will benefit farmers, give impetus to food processing industry and create vast employment opportunities.

- Krish Iyer, president & CEO Walmart India

FY17 Budget has provided a strong growth direction to the Indian economy. The Finance Minister has managed to balance the need to prioritize social sector requirements with economic and business imperatives. The segmented 9-Pillar Approach with well carved out deliverables will ensure execution clarity and focus. By adhering to fiscal deficit aim of 3.5 percent the Budget creates room for complimentary monetary policy rate cut of 50 bps in the near term and 75-100 bps in 2016, conditioned on favorably evolving macros. Key measure to increase the allocation to infrastructure with an impressive outlay of Rs 2.2 lakh crore will help to re-energize the growth multiplier, while the specific measures to improve ease of doing business and favorable tax treatment for start-ups and MSMEs will go a long way in boosting job creation.

- Rana Kapoor MD&CEO YES Bank

Government has been facing many challenges and keeping the fiscal discipline in control is one of the most significant one, especially, when the world economy is passing through major socio-political turbulence.  Keeping the fiscal deficit at 3.5% and yet meeting the growth & social objectives is a difficult task which the Finance Minister has attempted to solve.  There are no major negative surprises during these challenging times and that's good about this budget.   All the sectors viz. agriculture, infrastructure, oil & gas, realty, rural development, manufacturing, banking & tax reforms have been well addressed.   Focus on infrastructure & rural sector, which are the backbone of the economy & society, provides major impetus to the industries in the long term.  Overall this year’s budget can be termed as a good effort.

- Aditya V Agarwal, director, Emami Group

Overall, this is a responsible “Rural First” budget that attempts to revive demand, while continuing on the path of fiscal consolidation. For the FMCG sector, initiatives to support the revival of rural and urban consumption should help bring growth back on track. Focused efforts on alleviating rural distress and uplifting the agrarian economy, will help put more money in the hands of farmers. Statutory backing of the Aadhar scheme will ensure more targeted delivery of benefits to those who need it. The need of the hour is job creation and focusing on skilling and education to make people more employable. The implementation of transformative reforms, like the GST, at the earliest, are however imperative to fast track economic growth and boost consumer confidence. Given the Government’s intent to stick to its path of fiscal consolidation, we look forward to an interest rate cut or more liquidity in the system to drive private capital investment. Going forward, given the plethora of schemes that have been announced, it will be important to deliver on the promises made through effective on-the-ground execution.

- Vivek Gambhir, managing director, Godrej Consumer Products Limited 

The commitment shown by the government in adhering to the fiscal deficit target of 3.5% amidst the global headwinds and domestic challenges sends a strong signal to global investors. The increased infrastructure push, reforms in the financial sector and steps to boost ARCs are among the positive takeaways of the budget that puts due focus on social inclusion.

- Vishal Kampani - Managing Director & Head, Institutional Securities Group JM Financial

The Finance Minister has presented a very realistic budget with focus on critical areas such as development of infrastructure, skill development, job creation and tax simplification. Pro rural and farmer initiatives in areas such as agriculture, LPG cooking gas, public transport and electricity for all by 2018 were largely the need of the hour. Measures such as no change in service tax, reduced corporate tax for new companies and ease of doing business for new age start ups are definitely encouraging are sure to spur consumption led growth in the country.  Even though the budget did not present any out of the box reforms we believe it is a well rounded and a forward looking budget”

- Ullas Kamath, Joint Managing Director, Jyothy Laboratories

Our Finance Minister has very rightly given very high priority to rural infrastructure in general and  agricultural sector in particular.  Apart from all the pro-agricultural initiatives announced, the Finance Minister has laid out the road map for the Government’s ambitious aim to double farmers’ income in the next five years.  All these measures will go a long way in improving the livelihood of the farmers which forms a very large portion of our population.  This is expected to reform the agricultural markets. Thrust on the rural sector and social sector, including healthcare, educational skills and job creation, to make India a knowledge-based productive economy. I expect these measures to give a strong impetus to the demand for PVC pipes and fittings in the years to come.  The incentives for low cost housing also augur well for the demand for PVC pipes and fittings in the construction sector.

- Prakash Chhabria, Executive Chairman, Finolex Industries Ltd

On the affordable housing front the government seems to take active steps towards its Housing for All Mission, wherein various sops have been provided. Exemption from service tax on construction of houses up to 60 square meters under any scheme of the Central or State Government including PPP Schemes and 100% deduction for profits to an undertaking in housing project for flats up to 30 sq. meters in four metro cities and 60 sq. meters in other cities, approved during June 2016 to March 2019 will definitely encourage the developers to take Affordable Housing projects in a big way.

There is a good encouragement to the first time home buyers by way of Deduction for additional interest of Rs. 50,000 per annum for loans up to Rs. 35 lakh sanctioned in 2016-17, where the cost of the house does not exceed Rs. 50 lakhs. Rent deduction under HRA for individuals within the income bracket of Rs. 5 lakhs has been increased from Rs. 24,000 to Rs. 60,000. This would lead to additional tax savings and more disposable income.

We have to go through the fine print but this is a very positive step to promote growth of real estate in the country. It will have a two-fold impact – one – it will lead to additional sources of capital for developers and two – it will allow various stakeholders to participate in the real estate growth story of the country by unlocking value.

- Kamal Khetan, CMD, Sunteck Realty Ltd

The Finance Minister has managed to carve out a well-balanced budget proposition with a good spread of focus across major sectors while addressing issues of business and economic relevance. The 9-pillar approach lays specific focus on industry sectors while slicing out timely and feasible objectives with clarity for execution.

The current budget lays tremendous focus on rural development and resource mobilization for the rural economy while endorsing technology as a key platform for ensuring accountability and ease of operations.

Moreover the digital literacy scheme proposed to cover 6 crore additional rural households comes in as a very welcome move. Targeting more than 70% of the country’s population and enhancing digital literacy in this segment will ensure deeper penetration of the digital platform in rural India while driving the macro scheme of ‘Digital India and Digital Money’ with a renewed vigor.

- Naveen Surya, MD, ItzCash

From a rating perspective, the budget for FY17 contains a number of positive elements, even though it is subject to substantial uncertainty.

Firstly, the government continues to gradually broaden its ambitious reform program and like last year this budget contains some further announcements of reforms, including measures related to the FDI regime, the financial sector and agriculture. 

Secondly, fiscal credibility is supported by the central government meeting its budget deficit target of 3.9% for FY16, as well as by the choice to maintain the previously communicated target of 3.5% of GDP for FY17.

The acceleration of the targeted revenue growth to 14 percent in FY17 from nine percent in FY16 is subject to substantial uncertainty related to GDP growth.  At the same time, revenue growth is supported to some extent by a number of tax measures, including increased excise duties on various tobacco products and a one percent tax on luxury cars.

- Thomas Rookmaaker, group director, Fitch's Asia-Pacific Sovereign

The Budget is pragmatic and growth-oriented. The Government’s commitment for retaining the fiscal deficit at 3.5% will have sobering effect on the interest rate in general and on the yields of government and corporate bonds in particular. This will place our economy in the double digit growth trajectory. Coupled with agriculture, rural and infrastructure spending including roads and highways, the economy will have a resultant effect  of bottom-up demand generation and job creation. The auto sector will stand to benefit by the proposed amendment to the Motor Vehicles Act to allow the private sector participation in the passenger vehicle segment.  Amnesty window announced for unaccounted money is a good initiative. However, tax on dividend above Rs. 10 lakh is a big disincentive for promoters / large investors.

- Ashok P Hinduja, Chairman, Hinduja Group of Companies (India)

“The nation would have to wait and see its implementation, but the  Budget definitely generates substantial amount of positive sentiments. It has a vision of the government to bring out stability and equitable growth in the country.  Structurally sorted budget with adequate emphasis on agriculture, rural India,  infrastructure and health which will reap benefits in the long run.

 It may not be a populous one with incentives but there is enough balancing which has not harmed the common man rather aims at incentivising entrepreneurship in some segments. Benefits  of deductions to income below 5 lakh, exemptions on pensions and increase in deductions limits on home loan interest and incentivising low cost housing are good measure.

Although there is nothing direct for the industry or for that matter manufacturing sector, there is enough scope to generate demand and kick start the industry. The proposed spending on infrastructure and rural development definitely has the ingredient to get things going, provided the executions are done well. The attempt to reduce tax litigation is positive on the "ease of doing business" front.”

Dr Raghupati Singhania - Chairman and Managing Director, JK Tyre & Industries Ltd.

“The budget emphasizes the “Growth Grid (Governance, Reform, Social Infrastructure & Investments, Fiscal Discipline)” using nine distinct pillars to transform India. Overall a good budget which has focused on the immediate easing of agricultural stress and encouraging long term economic growth.”
Anup Bagchi, MD & CEO, ICICI Securities Ltd.

“As per the market anticipations this year’s budget focus is more on agriculture and job creation with a carefully drafted focus on revival of rural demand with increased agriculture productivity and farmer’s welfare. Rural spending is definitely going to be a game changer as far as agriculture sector is concerned”.
Arundhati Bhattacharya ,Chairman, SBI

We welcome this budget as it is positive and growth oriented with a clear view to uplift the rural economy.

The budget will result in major change in the sectors of agriculture and farmer welfare, rural development, infrastructure, social sector development and manufacturing among others. This is expected to result in increased employment, boost to entrepreneurship, better healthcare system and increased ease of doing business, all of which are pivotal to growth of the economy.

I congratulate the finance minister for taking definitive steps to address concerns of the global slowdown. Spurring rural development, focus on job creation and increasing consumer demand and exports are steps in the right direction for the Indian economy. The finance minister has maintained the fiscal discipline path by setting the fiscal deficit target of 3.5% in FY17.

The budget also reiterates the mission and vision of the government to achieve long term self-sufficiency and sustainability, create the necessary support infrastructure and enhance the nation’s  literacy rate.

On renewable energy specifically, as part of rural development, the government continues on its plan to providing 100% electrification by 1st May, 2018. This poses incredible opportunity for the renewable sector and to boost rural economy. At the same time, coal cess has been doubled to Rs. 400/tonne, thereby, creating the resources to achieve 30-35% carbon emissions reduction target outlined by India at COP21 this year and also 175GW renewables target by 2022.

Further, government commitment to improve grid infrastructure is reflected in the proposed additional depreciation for the plant and machinery acquired, installed for transmission activity.

The excise duty reduction from 12.5% to 6% on materials used for parts and sub-parts of rotor blades for wind operated electricity generators is a positive move. However, the government should review the increase in excise duty of unsaturated Polyester Resin (polyester based infusion resin and hand layup resin), Hardeners/Hardener for adhesive resin, Vinyl Easter Adhesive (VEA) and Epoxy Resin used for manufacture of rotor blades. Also, the imposition of service tax on freight charges incurred for transport of goods by sea will adversely impact the competitiveness of Wind turbine manufacturing in India  and hence the finance minister should also review the same.

We hope the government will reconsider the Accelerated Depreciation (AD) limit which has been reduced from 80% to 40% effective FY18. We wish to reiterate that the Accelerated Depreciation limit of 80% should continue till 2022, aligned to the government target of 175GW renewables by 2022 and to boost manufacturing under the Make in India vision. 
Mr Tulsi Tanti, Chairman and Managing Director, Suzlon Group.

“Fiscal prudence in the budget signals a commitment to macro-economic stability. This will also open up space for monetary easing in the near future which is positive for the rates market. Various measures for resolution of tax disputes will pave way for lower outstanding tax litigation. Combination of consumption push (7th  Pay Commission and rural economy) and continuous focus on capex by the Government should see higher growth next year. 

Welcome relief on Service Tax for small distributors earning less than Rs. 10 lacs.”

Mr. Milind Barve, Managing Director, HDFC Asset Management Company Limited.

“The FM has delivered a fiscally responsible budget.

The extension of SEZ scheme till 2020 and reduced tax at 10% for global revenues generated by India-registered IPR will further energise entrepreneurship. The FM has announced a slew of Digital platforms to connect farmers with their ecosystem. This is a very comprehensive technology-led plan that will significantly bootstrap the Indian heartland into the digital age. Also heartening is the plan to use digital technology across the board from administering taxes to issuing secure education certificates.

In summary, the FM has presented a forward looking budget and I will give it a 8/10”
N. Chandrasekaran, Chief Executive Officer and Managing Director of Tata Consultancy Services.




More Forbes India Budget stories:

Forbes India analysis: A big picture budget with nine colours Here are the new tax proposals announced by FM Jaitley

FM's health care push for the marginalised

Budget 2016: Where it surprised, where it disappointed

Union Budget 2016: Highlights