A week to go for the Finance Minister to present the Budget and expectations are running high. Will Arun Jaitley present a bold, pragmatic Budget or will he tinker on the margins? Will he pump prime the economy by announcing big-ticket infra spends? Will he articulate a roadmap for subsidy rationalisation? Will he simplify the tax regime? Will he bring in a Swacch Bharat cess?
CNBC-TV18 along with BMR advisors put these and several other Budget related questions to tax experts and the general public and the poll clearly indicates India wants FM to deliver a Budget that puts talk into motion and delivers on the many promises made so far. BMR experts, Bobby Parikh, chief mentor and partner, Gokul Chaudhri, leader, Direct Tax, and Rajeev Dimri, leader, Indirect Tax, in a discussion with CNBC-TV18's Sheeren Bhan.
Below is the transcript of the panel discussion
Q: Will the government promote economic growth in priority over fiscal deficit management and announce policy level measures to fuel the Make in India initiative and a significant majority, almost 80 percent saying that it is likely that the government will try and pump prime or stimulate the economy. If you look at all the comments that have come in from the finance minister so far reiterating that we will stick to the path of fiscal consolidation, we will stick to the path of 4.1 percent in this Budget and 3.6 percent in the next Budget and 3 percent later on. There is a view that maybe 3.6 could become 3.8 but do you really see him veering significantly away from the path of fiscal consolidation as the poll seems to suggest that stimulate the economy will be given priority?
Parikh: I think he will stay with the fiscal discipline bit, that he won't let go off that. So 4.1, 3.6, 3 whatever is the trajectory that has been set out he will want to stay with that trajectory for two important reasons. One is that the government wants to work to improve India's credit rating and that will require fiscal discipline and the other is that they want the Reserve Bank to reduce interest rate. So, both of those things will require discipline to be maintained.
Q: And the Reserve Bank has pretty much said that we will do what we can do but the ball is in your court and you need to show us.
Parikh: It will not happen but what the government can do is through more cash accruals from let's say the disinvestment or from auctions and things like that as well as whatever they can do from the expenditure commissions, recommendations and better management of the subsidies and overall expenditure of the government as a whole. Whatever cash comes free from that they can put more of that in to infrastructure and spend that more effectively so that; so you are staying with the fiscal trajectory that you want but at the same time you are allocating more capital.
Q: And they do have a cushion because of where oil is. The last Budget if I remember correctly they had calculated where oil was over a USD 100 a barrel and today we are talking about USD 60, in that band. Disinvestment in fact that is the second question that we have asked people on our poll; will the government unravel a systematic plan for the disinvestment of PSUs? We do not know whether they will finally meet the disinvestment target for this year or not, hopefully they will come close to it. That is the belief of the finance ministry but do you really see them announcing a significantly more aggressive disinvestment target and do you see that disinvestment finally is going to become a year long endeavour as opposed to being bunched up in the last quarter of the fiscal?
Chaudhri: Certainly the hope and expectation will be there that not only they will talk about divesting 5-7 percent in some of the large PSUs, they will also come up with a road map of those PSUs which the government wants to privatize in entirety.
The Finance Minister did speak about it at various forums in the run up to the Budget processes that he wants to look at some of the government investment that is stuck in non-viable PSUs and road map on that will be very clear.
Q: So, you expect loss making public sector companies also to perhaps be put on the table, do you expect a road map as far as the loss making PSUs are concerned? Disinvestment f course is a standard procedure.
Chaudhri: Yes that is the hope and expectation that along with the divestment process the road map for loss making enterprises should come into effect
Q: Speaking of reforms; this is the other question that we are asking that FDI related reforms what more can we actually see this government announce? Just yesterday in fact Amitabh Kant, the DIPP secretary said that I asked my joint secretary to tell me which are the sectors where we actually have not liberalised FDI and he was at a loss for words. So, with the exception of things like multi-brand retail or hiking the FDI limit in broad cast media, maybe they will look at that, I am not sure; do you really see any significant big ticket FDI related items in the Budget?
Parikh: I do not actually, for that reason but then I would just ask the question that why do we need to still have a 100 page FDI compendium. So, what does that contain and why does it need to be 100 pages and why can't it just be these three sectors or four sectors where there is some caps that they need to maintain for strategic reason or whatever but the rest of it should not exist at all. So, we opened up everything a while ago, now we should ask the question that do we need to really be looking for sectors and to 49 to 74 to 100 percent.
Q: Are we headed in that direction, you and I had this conversation that they will announce clarity on FDI and B2C e-commerce. We are having the same conversation today out poll seems to suggest that people believe that this government will open up that sector. Multi brand is completely off the table but you really believe that B2C e-commerce is likely to go through?
Chaudhri: The expectation still is, but their expectations have been belied over the last one year and that has been a bit if disappointment. We still hope that in some formal shape Amitabh Kant can move the needle a bit on e-commerce and opening up of e-commerce.
Q: Are we putting too much pressure and hope on Amitabh Kant?
Chaudhri: Well it is important because he is one of the key proponents of the Make in India campaign which is there. At the same point of time he has to address the concerns of the investor community which is saying that we need to be allowed to retail in India in all the modus operandi that we wish to pursue which is including e-commerce. So the expectation was there that they will bring B2B, B2C coming in and that has been a bit of disappointment.
Q: On the goods and services tax (GST) and we asked will any specific GST related announcements be made on the proposed rollout, the rate and so on and so forth. Do you think he will stick to April 1 2016 to start with as the rollout timeline?
Dimri: In this Budget particularly on the GST because the key action that needs is on the Constitutional Amendment Bill which is not going to happen on February 28th but you do expect some affirmative statements, some very strong statements to come out. Also you would not want to see any changes in the current structure of indirect taxes which are contrary to GST because that would be a wrong signal. One does expect some changes should be aligned to the GST.
Q: So service tax and we have had this conversation, do you believe that he is going to move on the service tax rate in order to align it to the eventual GST rate?
Dimri: If you are talking about is there a case to increase the rate of service tax, I personally believe there is a case to increase because eventually the service tax will climb as GST comes in. However if it is only left at that, that might disappoint a lot of people because there is a huge issue on unlocked credits and restrictions on credits.
So, if it is a combination of those factors then that would be the step in the right direction that you align the credit scheme and if that means that there is a certain increase in rates that is fine. However, there has to be strong statements in the Budget as part of his affirmation to continue targeting the deadline.
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