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Pragmatism at work

Saturday, 2 March 2013 - 9:30am IST Updated: Saturday, 2 March 2013 - 12:50am IST | Place: Mumbai | Agency: dna

The reduction in STT, coupled with increased FII participation, will boost equity and currency markets.

The framing of the budget in a democratic set up is the art of balancing multiple objectives ranging from the micro to macro and from economics to politics and this Budget is an exemplary illustration of the same.

The finance minister presented a realistic Budget with focus on spurring infrastructure and agricultural growth. Looking at the current scenario, the fiscal deficit at 4.8% appears credible, though the need for further fiscal consolidation persists.

Unlike past budgets, the FM’s speech wasn’t cluttered with the baggage of numerous amendments to laws.

The Budget echoes the need to encourage inflow of foreign investment in line with economic objectives, the need to take all steps to augment supply side to meet the growing demand for food items, to rationalise government expenditure and increase allocation to all priority sectors.

The constitution of an expert committee to analyse the international competitiveness of the Indian financial sector is a step in the right direction.
One would have hoped that the deduction for interest paid on a housing loan would have been available to all and not solely for those availing their first home.

TDS levy at the meagre rate of 1% will go a long way towards improving reporting of immovable property transactions.

The proposal to levy a final withholding tax on profits distributed by unlisted companies to shareholders through buyback of shares plugs the loophole but at the same time it will deter genuine corporate restructuring.

While introduction of CTT will be a slight speed bump for the commodity markets, the reduction in STT coupled with increased FII participation will boost equity and currency markets. The raising of income limit by 20% for investment in Rajiv Gandhi Equity Savings Scheme will enable first-time investors to participate in the capital markets.

The significance attributed to the debt market by allowing stock exchanges to introduce a dedicated debt segment on the exchange and allowing insurance companies, provident funds and pension funds to trade directly is commendable.
The investors in securitisation trusts should rejoice since there would be no further tax levied on the income received by them from the trust formed as special purpose vehicle.

While the Budget has set the right tone for economic growth over the next year, I keenly await the appropriate policy action to match the announcements.
It would not be out of placed to remember the words of late Nani Palkhivala: "Taxes are the lifeblood of any government, but it cannot be overlooked that blood is taken from the arteries of the taxpayer and, therefore, the transfusion is not accomplished on dictate of political expediency, but in accordance with the principles of justice and good conscience.” Overall, the Budget takes a pragmatic approach.

The writer is Group CFO, JM Financial

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