Finance Minister Arun Jaitley’s Budget was a practical and pragmatic exercise in overcoming the difficulties the country is facing over the last few years both in terms of investments and economic growth.

Although there were no big-bang announcements and changes, all the proposals were pragmatic and growth-oriented.

The fiscal deficit targets were sensible. The announcements on GST and avoiding retrospective taxes were good. Increasing FDI limits in defence and insurance will be very productive. MGNREGA expenditure will be on productivity improvements in rural areas is a good development.

The emphasis on affordable housing and developments of new townships in the outskirts of major cities will be useful.

The provision on REITS will be good for the real estate industry.

The new investment allowance will lead to encouragement in investments but it is also important that the minimum alternate tax (MAT) be reduced before the Budget be passed for it to be effective.

The changes in the FII tax treatment will be good for the stock market. Overall, I feel the Budget was an excellent exercise of the new Government.

The problems many industries had on anomalies in import duty and excise structure have been addressed.

This will certainly help in accelerating industrial growth. The provision reducing the investment allowance from ₹100 crore to ₹25 crore is welcome.

However, many companies will not be able to get this benefit, and, therefore, may invest less because of the MAT. Before the Budget is passed, the Finance Minister needs to reduce MAT rates considerably.

Another damaging proposal in the Budget is the increase in effective rate of dividend distribution tax from about 18 per cent to about 20 per cent.

Chairman, Godrej Group

Related Topics