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India ink speaks: Policy details will determine the degree of implementation

The decision to abolish the Foreign Investment Promotion Board (FIPB) is expected to clear a major obstacle for foreign investors.

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HEMANT KANORIA
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The highlight of this year's budget is a long 'To Do' list aimed at improving the efficiency and productivity of the economy. The budget speech mentions a number of steps to be taken and several policies to be announced. But until and unless the details of those are in the public domain, it would be premature to comment.

However, our first impression about this budget is that it aims to make the best use of the available resources to deliver the best possible results. In this regard, the decision to abolish Plan and Non Plan expenditure and to opt for a consolidated Outcome Budget is indeed a step in the right direction as it brings in higher degrees of accountability. Also, the Hon'ble Finance Minister's resolve to keep fiscal deficit at 3.2 per cent of GDP for FY18 while at the same time stepping up capital expenditure by a fourth is indeed commendable.

Like the last budget, the Hon'ble Finance Minister has laid out a number of measures for the development of the rural and agriculture sector. The increased outlays for building rural roads, housing and irrigation, the progress of village electrification and sanitation, the use of scientific technology to track progress of MGNREGA projects and the emphasis on skilling are certainly some of the positive developments. The tax reduction for small and medium enterprises and the marginal cut in income tax rate for individuals will provide some relief.

The housing sector has suffered a lot from the demonetization drive and thus it is good to see the Hon'ble Finance Minister paying adequate attention to this sector. Infrastructure status accorded to affordable housing is a welcome development. The move to defer levy of tax on rental income by one year (after year of completion certificate is received) will allow builders some breathing space to clear their inventory of constructed flats. Also, the move to reduce the holding period for computing long-term capital gains from transfer of immovable property from three to two years will provide some boost to the housing sector. However, the same cannot be said about the other infrastructure sectors. While increased outlays and intended targets have been laid out for various modes of transportation, I was expecting some more measures to be announced for the infrastructure sector. This was perhaps the ideal time to revive leasing in India and to create a market for Bid Bonds, especially when we envisage a growing role for private sector in infrastructure creation.

The decision to abolish the Foreign Investment Promotion Board (FIPB) is expected to clear a major obstacle for foreign investors.

There was not much clarity on how the government intends to bring down the cost of financing for infrastructure projects or how to revive private sector participation. Tax streamlining has been an area of concern and I was expecting the Hon'ble Finance Minister to address this. However, it did not figure in his speech. The concessional withholding tax of 5 per cent charged on interest earned by foreign entities in ECBs or in bonds and government securities should have been ideally done away with. We must appreciate the fact that given the stress in our banking sector, we need more foreign funds. Thus, every step towards attracting foreign funds should be taken.

HEMANT KANORIA,
Chairman & Managing Director, Srei Infrastructure Finance Limited

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