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Pragmatic but non-populist: NRIs

Issac John / 17 March 2012

DUBAI - Indian budget, regardless of its implications on overseas Indians’ lives, is invariably a cause of celebration for the Gulf-based NRIs.

Like every year, this year’s budget proposals drew mixed opinions from the NRI community in the UAE. While some described it as a tightrope-walking act, others called it as a pragmatic, non-populist but reformist move.

The new budget, which is 18 per cent larger than the current year’s budget, underscores the tough task of curtailing deficit and subsidies, while meeting growing demands to support improvement in education and health care, as well as to create jobs in the vast agricultural sector while putting the country on track to achieving a stronger fiscal position.

For NRIs there is nothing to feel great about in the proposals apart from a pledge that the controversial Direct Taxes Code, or DTC, Bill will be enacted only after expeditious examination of the report of the Parliamentary Standing Committee.

Most business leaders in the UAE, in their response, backed the budget for its emphasis on striking a balance between fiscal consolidation and strengthening macroeconomic fundamentals.

Some respondents felt that the proposals fell far short of their expectations with no path breaking reforms or major new policy initiatives.

The budget proposes modest but welcome changes in the income tax, while corporate tax is not touched. Some feel that the budget sets only modest targets for trimming a ballooning fiscal deficit.

The proposed budget identifies five objectives to be addressed effectively in the ensuing fiscal year. They include focus on domestic demand driven growth recovery; create conditions for rapid revival of high growth in private investment; address supply bottlenecks in agriculture, energy and transport sectors particularly in coal, power, national highways, railways and civil aviation; intervene decisively to address the problem of malnutrition especially in the 200 high-burden districts and expedite coordinated implementation of decisions being taken to improve delivery systems, governance, and transparency; and address the problem of black money and corruption in public life.

Given below are comments on the budget made by a cross-section of the NRI community and business leaders.

Yusuffali MA

Managing director — EMKE Group and director board member of Abu Dhabi Chamber of Commerce and Industry

I think this is a realistic budget given the fact that India also has a lot of fiscal challenges as rest of the world. I look at four sectors — capital markets, agriculture, infrastructure and aviation where finance minister has laid great emphasis.

The huge allocation for basic infrastructure development is going to be a big booster for the large segment of both rural and urban population with direct impact on the health of Indian economy. Allowing FDI in aviation sector and approval to import aviation fuel is sure to help the ailing Airlines industry and will make them more efficient I hope. Removal of bottlenecks in agriculture loans and highway constructions are big steps, as India’s next leap depends a lot on these two elements.

As an NRI, the only thing that gives me slight happiness is the deferment of implementation of DTC. “Sometimes painful treatments are necessary for long term happiness” and this is reflected in some of the “not so popular” steps like controlling subsidies, hike in excise and service taxes, etc., while keeping corporate tax rates intact.

Faizal K.E.

President and CEO of KEF Holdings

The Finance Minister has prepared an acceptable fiscal deficit target of 5.1 per cent of the GDP, which is in line with market expectations. The overall world economy   is slow and India ending with a GDP 7.6 per cent is acceptable in spite of a fall from previous 8.6 per cent.

Increased focus on spending in infrastructure and rural health will have big positive impact. A target of covering 7,700km of roads next year and increase in allocation for the Road Transport and Highways Ministry by 14 per cent will help upgrade infrastructure. Funds have to come from increased tax income and disinvestment. We can expect tax collection to be tougher. The deferment of direct tax code —that proposes to tax the global income of non-resident Indians if they stay in India for more than 59 days in a year and 365 days over a four-year period — is a welcome move.

The proposal for an increase in allocation by 21.7 per cent for Right to Education — Sarva Shiksha Abhiyan to Rs255.55 billion and by 29 per cent for Rashtriya Madhyamik Shiksha Abhiyan to Rs31.24 billion — will have far reaching positive impact in empowering the new generation. Similarly, a guarantee fund to ensure better flow of funds to students is right move.

Overall, a positive budget except for the increase in indirect taxes like excise duty and service tax which will have an impact on several industries.

Sunny Varkey

Chairman Varkey Group and GEMS Foundation

A pragmatic, non-populist budget that seeks to strike a balance between social development and long-term growth. However, the proposals did little to inspire confidence in efforts aimed at narrowing a widening deficit that continues to fuel inflation.

The proposals to strengthen Integrated Child Development Scheme and additional allocations for research on climate change and towards National Skill Development Fund are some positive aspects.

The proposals to prioritise addressing malnutrition, black money and corruption in public life are also welcome. However, more bold initiatives are required to upgrade infrastructure, boost industrial growth, control fiscal deficit and check inflation. Keeping corporate tax rates unchanged will help boost business confidence.

The budget made an attempt to widen the service tax base while exempting services in the fields of education, renting of residential dwellings, entertainment and amusement, public transportation, agriculture and animal husbandry.

The proposal for increased allocation for food security and rural health schemes will go a long way in societal development.

Dr Ram Buxani

President ITL Cosmos, and vice-president, Indian Business Leaders Forum

NRIs should be happy that DTC Bill restricting stay of NRIs has not been introduced this year also. Although it was not also announced specifically that idea is scrapped.

The Finance Minister, treasury bench as well as opposition were all seen in rare atmosphere of peace and several exemptions were announced which will make some quite happy. Increase in the customs duty on gold will help Dubai’s business.  India has presented a budget, which will make neighboring Gulf states happy.

There have been many anti-evasion laws some of them giving government teeth to go back the cases for 16 years. Implementation is main thing to be seen.

Mohan Valrani

Senior vice-chairman and managing director, Oasis Investment Company

This is a pragmatic budget. The high allocation of funds to infrastructure sector will help the economy to grow in the long run. However, the fiscal deficit number is a bit high.

The proposal of two per cent cap on subsidy is a step in a positive direction. Deferment of Direct Tax code implementation will help NRI worldwide.

Students and parents have a reason to cheer as pre-school and high school education have been put in the negative list exempting them from service tax.

Marginal raise in Income Tax exemption limit of Rs20,000 will give some relief to tax payers but hike in service tax and standard excise duty by two per cent across the board will increase inflation.

Rizwan Sajan

Chairman, Danube Building Materials Group

A pragmatic budget — to sum it up in a few words. Given the political and economic climate, this is a credible budget. The intentions are good and there is a sense of direction.

Although, there are no big-ticket reform announcements in it, there appears to be some good news for the infrastructure, coal and agriculture sector.

This should help the economy. The quality of disbursement of subsidies using IT infrastructure is also a good initiative and this should help to plug the leakage and benefit the needy.

The fiscal deficit, which’s a cause of worry, is expected to come down to 5.1 per cent from 5.9 per cent in this year.  Growth is expected to be at 7.6 per cent. This requires a lot of productive hard work from the government. I hope that, with inflation moderating and fiscal consolidation expected, we should be on the path of inclusive growth. But, implementation of what is set out in the budget holds the key to growth.

Dr Bharat Butaney

President, Indian Business and Professional Council, Dubai

Appears like a ‘budget in continuity” with nothing exciting. A welcome move for NRIs was the proposal to defer implementation of Direct Tax Code. Hope that deferment is permanent.

One would have expected a populist budget. But it is not. Nothing much proposed for poverty alleviation. No tax for income up to two lakhs, against the proposed three lakhs is not in favour of the common man.

Increased allocations for infrastructure, rural health, improving sanitation and tackling malnutrition will have long-term effects. Raising duties on cigarettes and cars is welcome move. Exempting coal and LNG from customs duty helps the common man.

A fiscal deficit of 5.9 per cent is too big. Austerity measures including cuts in governmental expenditure and measures to ensure better tax collection have not been defined. Net revenue loss of Rs450 billion is alarming.

Move to allow foreign airlines will impact growing home-airline industry. Efforts should be made to encourage the local airlines to improve their services.

Paras Shahdadpuri

Chairman, Nikai Group of Companies and Immediate Past President of IBPC

Given the political compulsions of the UPA government, I think the Finance Minister has done a decent job. Finance Minister has made a good attempt on consolidating the budget, rein in fiscal deficit to 5.1 per cent of GDP; generate funds by disinvestments; promise reduction in subsidies to limit it progressively from 2.4 to 1.7 per cent of GDP; provide direct cash subsidy to the intended section of population; provide funds for mid-day meals in the context of food security; provide outlays for social sectors, etc. etc.

There has been a visible attempt to make it an inclusive budget.  Agriculture sector has been pampered by large lending budgets and it is well known that such loans end up as Non-Performing Assets, which essentially means financial subsidy to the farmers.

Not enough has been done for the infrastructure sector, even though Tax Free Infrastructure Bonds have been raised

Having said this, I strongly feel that the government has missed an important opportunity to present a bold budget.

 issacjohn@khaleejtimes.com

 
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