Indian Businessmen Welcome Budget in Khaleej Times

Indian Businessmen Welcome Budget

KHALEEJ TIMES

Issac John

26 February 2010, 9:22 PM DUBAI - Indian businessmen and professionals in the UAE welcomed budget proposals made by Finance Minister Pranab Mukerjee on Friday as “balanced and pragmatic” with a focus on 
fiscal prudence.
While the proposal to lower the Tax Deducted at Source rate on interest earned on NRI deposits from 20 per cent to 10 per cent was greeted by non-residents as a step that would encourage non-residents to deposit their money with banks in India, the forward-looking and inclusive budget also drew widespread applause for its focus on rural development, health and education, housing for the poor, agriculture and infrastructure growth.

The roadmap drawn to reduce fiscal deficit from 6.5 per cent to 5.5 per cent next year and 4.1 per cent thereafter has been expected, but the biggest surprise, most of those who spoke to Khaleej Times confessed, was the reduction of personal taxation – a move that could put around 3-4 per cent additional income in the hands of the taxpayer.

Following are excerpts from their comments:

Yusuffali MA, Managing Director of EMKE Group and Director of Abu Dhabi Chamber of Commerce & Industry:
Given the circumstances, the finance minister has done a good job. The fact that we have achieved a healthy growth rate of 7.2 per cent and aiming for double-digit growth for next year is a commendable feat.

The renewed focus on agriculture, infrastructure, rural development, health, education and housing for the poor is very crucial to India’s development and certainly will pay dividends in the long run. The positive revision in personal income tax rates will put more money in the pockets of the middle class, thereby increasing the buying power.

Easing of foreign direct investment regulations and allowing more private players in the banking sector are very welcome steps. Customs duty has come down. This will ignite growth in the manufacturing sector.

The increase in fuel prices will surely not go down well with the masses and there will be lots of going back and forth on this. But what surprises me the most is the sidelining of NRIs in the budget.

Sunny Varkey, Chairman of GEMS Education Group:
The forward-looking and inclusive budget seeks to spur economic growth and promote social well-being with focus on health and education, housing for the poor, agriculture and infrastructure development. The increased thrust on rural development and job creation make the budget proposals pragmatic and progressive. The budget also gives a roadmap to reduce fiscal deficit from 6.5 per cent to 5.5 per cent next year and 4.1 per cent thereafter. The proposal to lower Tax Deducted at Source rate on interest earned on NRI deposits will encourage non-residents to place their money with banks in India. The Finance Minister has done a delicate balancing act by rolling back some of the fiscal stimulus without hampering the growth prospects of the nation.

Paras Shahdadpuri, Chairman of Nikai Group, and President of the Indian Business and Professional council:
The biggest challenge for the government was to contain its fiscal deficit of estimated 7.8 per cent (which actually has come down to 6.9 per cent) for last year to 5.5 per cent in the new fiscal year. This meant rolling back some of the fiscal stimulus without impacting on the growth of the economy; and the Finance Minister has done a brilliant job on that. While the Western countries with more than 10 per cent fiscal deficit have failed to bring in this fiscal discipline, India has shown the way.

This is a growth oriented and inclusive budget, providing focus to the development of the rural masses. The government has now seriously set its focus on India’s infrastructure growth by offering tax exemption in Infra Bonds. But I strongly feel that much more need to be done to mobilise more than $500 billion required for the infrastructure development. If infrastructure needs are met, India can grow with double-digit GDP for the next 25 years and thus become world’s second or third biggest economic power.

Raju Menon, Chairman & Group Managing Partner, Morison Menon:
The budget was a need based one with respect to the outlay in the area of agriculture, specially for food security, rural development, rural employment creation, empowerment of women, health sector, eradication of slums and so on. Investment in infrastructure is also a need based spending as wide network of roads and rails are considered as the barometer for the development of the economy for the fast progress. It is so encouraging to note that the primary and secondary education nation wide is brought free which will really benefit the poor to empower their children to participate in the development of the country and will provide a hope to transform the entire family to lower middle class from the poor class once these children can qualify for better employment prospects.

Increase in the petroleum prices is not at all justified on the ground of generating more budget revenue as it is giving an increased burden of price hike in every area and it is going to hit as additional burden on the overall price hike exist in the system. It affects 1.1 billion population and finance minister’s justification of today’s low level crude price is not at all acceptable considering the current inflation on the essential commodities. The price increase is going to severely affect the down trodden largely and the 10 million middle class who have benefited out of the direct tax relief may be able to afford to absorb the price hike due to the given 
concessions.

There was a mention about the investigation of the foreign wealth of the residents who had evaded taxes. Probably, in my opinion, Finance Minister should provide an opportunity to declare the undisclosed wealth by providing a lower rate of tax, say 20 per cent flat with out any penalty and there can be a condition that the 50 per cent of the undisclosed wealth subjected to the declaration should be invested in infrastructure projects. Who knows, the entire 6.9 per cent current fiscal deficit may be financed from that source. It is not uncommon to give such concession in India.

Ram Buxani, President ITL-Cosmos Group:
The budget this year is again befitting a seasoned Finance Minister who has tried to take care of all areas within means available to him.

Ignoring Overseas Indians has been his way right from the beginning. Otherwise, with present scenario in Gulf countries, some rehabilitation packages should have been thought of and provided for in the budget for returning workers.

Overseas Indians should be considered as a main export commodity as they bring in valuable foreign exchange. They need to be treated no less importantly than rural population. Government of India may be justified in its attitude towards NRIs in view of present foreign exchange situation, but their role should not be forgotten. A fair percentage of inward foreign remittance should be earmarked for the welfare of returning workers. Tax on income has been further rationalized which should be welcomed by Resident Indians.

Sudhir Kumar Shetty, Chief Operating Officer, Global Operations of UAE Exchange:
It is a very responsible, controlled budget. Road map to control the fiscal deficit from 5.5 per cent of the GDP in 2010-11 to 4.1 per cent in 2012-13 indicates that the government is serious in achieving financial discipline. Even though the middle-income group is given an incentive by way of reduction in individual income tax, the increased Central Excise on petrol and diesel and other taxes will hurt the economy. To control inflation, create more job opportunities and proper management and monitoring of allocations would be a challenge. I am happy that RBI is considering banking licence to private operators.

Kamal Vachani, Director Al Maya group and Regional Director of ESC India:
The revised tax slab proposal will help put more money in hands of consumer and enhance consumption. The proposal to lower customs duty will ignite growth in the manufacturing sector.

The proposal to ease of foreign direct investment regulations and allowing more private players in the banking sector are steps aimed at attracting more foreign capital to boost infrastructure development. Reforms in the farm sector and an increase in social welfare spending, renewed focus on rural education, employment and development are measures aimed at taking India to the fast track of economic growth.

Rizwan Sajan, Chairman, Danube Building Materials:
I believe it was a balanced and pragmatic budget. It was heartening to hear, for the first time ever, the Finance Minister speak of the “big picture” at the beginning of his speech and stress the fact that the government is ‘‘an enabler” in the development of the country. This is very

positive and demonstrates government’s intent to have public-private partnership for overall economic development. Reduction of fiscal deficit from 6.5 per cent to 5.5 per cent next year and 4.1 per cent thereafter is encouraging. With GDP expected to return to “normal times” at 9 per cent, double digit growth should not be distant dream. This is a commendable achievement given that we are still under the shadow of global recession. Increased spending in infrastructure than revenue expenditure signals the need to build quality assets rather than spend on expenses. Farm sector reforms and social spend increase will augur well for the vast majority of Indians in the agricultural and rural sector. However, petrol/diesel price increase was a surprise and this could have an impact on the overall cost.

Johnson Thomas, Managing Director, First Flight Couriers:
The proposed budget is a balanced, responsible and cautious one. Without the pressure of upcoming elections, the budget focuses mainly on long-term benefits. A major concern is the fuel price hike that would give rise to inflation. Nothing has been done to improve exports that had gone down by 23 per cent in the last fiscal year. Controlled fiscal deficit, tax relief for the middleclass sector and a sustained growth rate are the major positive aspects of this budget. Overall, a solid budget welcomed by the majority. This is evident by the positive response of the share market.

Abbas Ali Mirza, Board Member, Indian Business and Professional Council:
A very responsible budget with not many negative surprises which certainly delighted the Indian stock markets — a swift vote of confidence given by investors to the budget proposals. In the wake of the global economic and financial downturn any boost to investor confidence is a move in the right direction. According to the finance minster this budget was presented with the following three primary objectives in mind, namely, getting back on track the economic growth trajectory of 9 per cent GDP growth rate, fiscal consolidation and inclusive growth.

The finance minister believes these objectives were clearly achieved with a major thrust in the budget on infrastructure spending with a historic 46 per cent budget allocation to infrastructure (including 25 per cent to rural infrastructure) and a significant budget allocation of 37 per cent to social sectors.

Jitendra Gianchandani, Chairman of Jitendra Group of Companies:
This budget is a perfectly balanced one for the burgeoning $ 1 trillion Indian economy. The big picture of finance budget is four fold: one the government is committed to containing fiscal deficit to 5.5 per cent.. Two, the lower personal income tax slabs would enable consumers to have more money, triggering a consumer-led growth. Third point is something that affects even NRIs in some ways.

FM has committed to goods and services tax (GST) and direct tax code (DTC) to start from April 2011. We all know that GST is part of the proposed tax reforms that center round evolving an efficient and harmonized consumption tax system in India.

K.V Shamsudheen, Vice Chairman, Indian Business and Professional Council:
The Finance Minister has decided to collect more direct taxes and corporate tax even after extending highest threshold limit of 30 per cent tax to Rs. 800,000 and providing it for the development and quality life of rural India by increasing allocation for farm credit for agriculture, health insurance and facilities, education and rural infrastructure. It will generate more job opportunities and help boost farmers’ income. The budget has totally neglected non-resident Indians. If we do not react immediately, the passage of Direct Tax Code passes will be a backlash for non resident Indians.