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Budget 2019: How India Inc. reacted to Modi 2.0’s first financial road map
India's Prime Minister Narendra Modi | Photo Credit: Reuters

Expectations were high as Nirmala Sitharaman took the podium to present the first Union Budget on Friday following the Narendra Modi-led National Democratic Alliance’s resounding victory in the recent Lok Sabha elections.

In the days leading up to the presentation itself, executives, industry analysts and policy experts from across the spectrum stated their expectations for India’s financial road map, with suggestions ranging from boosting consumer spending to a greater emphasis on fiscal consolidation.

A day prior, the Economic Survey said India is likely to grow at 7% in the current financial year, but will have to accelerate growth to 8% in the coming years if the country is to become a $5 trillion economy by 2025. The $5 trillion mark is a stated goal of the government.

While the Survey said it expected economic growth to pick up pace this year owing to macroeconomic stability, it added the government’s target could be met only through a “virtuous cycle” of savings, investments and exports, catalysed by a favourable demographic phase. The Survey itself came around a month after news that the economy grew at a lower-than-expected 5.8% in the January-March period, the slowest pace in more than four years.

So how, then, did India Inc. react to the Budget? Here’s a look at some of the reactions:

Job focus

Piramal Group chairman Ajay Piramal said the Budget document outlined a 10-year vision for the country while retaining focus on the economy’s immediate needs.

“The focused impetus for sustainable job creation via targeted investment in infrastructure projects and other productive sectors of the economy will have a cascading effect on secondary and tertiary employment. The mission to provide housing for all by 2022 has the potential not just for growth in downstream sectors such as cement and steel but also for overall job creation in these crucial industries,” Piramal said.

Godrej Consumer Products Ltd managing director and chief executive Vivek Gambhir said the need of the hour is more productive job creation and gainful employment to meet the needs and aspirations of young India. “We hope to see this enabled through ‘Make in India’ and investments in infrastructure and entrepreneurship. The proposed changes to skill India in more future-ready skills, will be critical to make people more employable to take on these opportunities,” he said, adding that the focus on promoting a digital economy would also benefit all industries.

'Expect bond yields to ease'

The Budget seems positive for the bond market, with the new fiscal deficit target of 3.3% of GDP compared to the interim Budget target of 3.4% expected to lead to ease in yields, HDFC Bank chief economist Abheek Barua said.

“Additionally, the comments from the finance minister that the government would raise part of its borrowing in foreign currency should take a lot of supply side concerns off the table. More foreign inflows on this account should also lead to some gains in the rupee,” he said. For the current year, while nothing additional has been budgeted for the overseas borrowing account, opening up of this route should benefit the bond market in the long term, Barua added. He also highlighted a fundamental shift in the budgeting philosophy, with the government now seeking external funds for sovereign needs.

Ease of doing business?

The industry questioned the efficacy of a proposal for a dispute resolution panel, which is limited to indirect taxes under the federal legislation’s pre-GST regime and subject to a number of exclusions.

“Attempts have been made even in the past to announce similar amnesty schemes and unfortunately have not made any dent on the pending litigation,” Cyril Amarchand Mangaldas partner Mekhla Anand said.

Cheer for startup ecosystem

Startups and prominent members of the startup ecosystem reacted positively to the government clearing the air on ‘angel tax’ and the announcement of tax incentives for Alternative Investment Funds (AIFs).

“AIF-II funds now protected from angel tax: Wonderful move to support innovation and private investment,” said TVS Capital chairman Gopal Srinivasan.

“All of these measures were the need of the hour for our startup community and will create conducive environment for futuristic and globally scalable businesses in India,” Venture Catalysts co-founder Anuj Golecha said. “The budget is favourable for startups and small businesses, with exemptions on angel tax, no scrutiny of funds by the income-tax department, and the proposal to start a television channel for startups,” Rupee Circle co-founder Abhishek Gandhi said.

Moves for financial sector hailed

Policy proposals for state-run banks and non-banking financial companies (NBFCs) were welcomed, with most experts singling out the move to infuse a further Rs 70,000 crore into public sector banks laden with bad debt as a positive one.

"The move to recapitalise banks with a capital infusion of Rs 70,000 crore and bringing an increased number of banks out of the Prompt Corrective Action framework will not only boost lending activity in the economy but also kickstart the investment cycle in the country,” Singhi Advisors founder and managing director Mahesh Singhi said.

“The budget proposal to provide a one-time credit enhancement to state-run banks for six months for the purchase of high-rated pooled assets of sound NBFCs will ease liquidity burden. The boost to International Financial Services Centre is a step towards making India a global financial hub. Progressive taxation proposed in the Budget was also on expected lines,” Rajeshree Sabnavis & Associates founder Rajeshree Sabnavis said.

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