Need for a transformational Budget

There is dire need for a transformational budget as India is witnessing astonishing changes at local and global levels. It will be very important to see fiscal policy particularly on revenue expenditure discipline. This would require cuts in spending on Defence, and a reduction in central government assistance to the States. Such cuts are necessary in an environment of high inflation and robust growth. They would also create room for other priority expenditure in health and education. The Budget should be more liberal on FDI route for many sectors. Times are challenging but opportunities are overwhelming.

Vikram Kotak,

CIO, Birla Sun Life Insurance

Political needs and tough decisions

With Mr A. Raja behind bars the Parliament will function during the Budget session. This is a relief for equity investors whose confidence and wealth have been impacted by inflation and rising interest rates; and ethical deficit and its fallout on key decisions. However, as elections are coming up in several States, the Government may defer tough decisions on decontrolling diesel prices and curbing subsidies.

Direct money transfer to the rural consumer will continue to be in focus. The FY11 fiscal deficit is likely to be lower due to the telecom auctions.

From a stock market perspective, we would keenly watch for clarity of taxation on long-term gains under DTC as any tax on long-term gains could lead to profit-booking before the tax comes into place. Another, key point will be disinvestment proceeds that could be below target for FY11 with a large target for FY12 to compensate the 3G inflows in FY11.

Manish Shah,

Associate Director-Business Strategy and New Initiatives, Motilal Oswal Securities

Bring in clarity in legal and tax issues

The Government's plans for rural inclusion can be a big boost for telecom, which will be used to disseminate banking, healthcare, education and other specialised offerings for fishermen, artisans, and others. The tax holiday (in telecom sector) for new rollouts under section 80IA should be restored. MAT rate needs to be reduced and rationalised. There has to be clarity on several issues: Are payments for 3G and BWA spectrum revenue expenditure; how will withholding tax issues be treated; are recharge coupons liable to service tax or sales tax. Service tax should be reduced. Service tax exemption for service providers will help improve working capital. Cell sites and tower locations can be made as qualifying capital goods to allow input service credit.

Changes in Finance Act, 1994, should be made to allow telecom industry to discharge service tax liability on distribution margins. Define clearly items allowed for computing Adjusted Gross Revenue for payment of licence fees.

Hemant Joshi,

Partner, Deloitte Haskins & Sells

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