Adi Godrej rates Finance Minister Arun Jaitley’s Union Budget an 8 on 10. He says Jaitley’s Budget will help revive the country’s GDP as it lays a lot of emphasis on social infrastructure and Indian agriculture.
In an interview to CNBC-TV18, Godrej says Jaitley’s clarity on the GST timeline is a major positive as he has emphasized the government will stick to the April 2016 date for the implementation of the tax.
“GST will put in place a state-of-the-art indirect tax system by 1st April, 2016,” said Jaitley today.
However, the big disappointment, Godrej says came on the back on manufacturing sector. Despite high hopes, buoyed by the government’s Make in India programme, the FM made no big announcements to boost the manufacturing sector.
BMR Advisors' Bobby Parikh, another guest of the panel says he welcomes the FM’s anti black money thrust.
Below is the transcript of Adi Godrej and Bobby Parekh's interview with Menaka Doshi & Senthil Chengalvarayan on CNBC-TV18.
Menaka: What do you make of this Budget, some investors are saying it misses the wow factor, is that a disappointment for you?
Godrej: I think the Budget has been good on many fronts. One, I think it will help gross domestic product (GDP) growth. The large investment into infrastructure, the great emphasis on agriculture and social infrastructure will help. Some of the steps taken for the long-term in terms of black money and others will be very useful. Some of the other announcements for the long-term also will be good. For example, the fact that he wants to bring corporate tax rate to 25 percent in four years time is a good move.
At the same time I think manufacturing has fallen between two stools because he doesn’t want to give any new incentives to any sector of the economy because he wants to bring corporate tax rate down but this year he has not brought corporate tax rate, in fact corporate tax rate has gone up because the 2 percent surcharge which he announced he will charge on higher income individuals is evidently applicable to the corporate sector too. So, I feel that manufacturing will not get the boost we expected this ‘Make in India’ Budget to provide.
Senthil: Goods and services tax (GST) he gave a timetable but it is April 2016, is that a bit of a disappointment?
Godrej: I think nobody expected it to be implemented before that but I am very glad that he has given a date. I think that is a good date, people are encouraged by the date. I hope they are able to stick to it.
Menaka: There is an increase in surcharge for FY16, so effective tax rate goes up to 34.6 percent. We have got excise rates going up, we have got service tax rates going up of course to align themselves to GST but will this entire combined mean a big pressure on financials for corporate India for FY16?
Godrej: I think so because the cut in the corporate tax which would have come through has been delayed. He has not done anything this year although he has announced that it will be over four years. So, as I have mentioned many sectors have benefitted especially international investment. All the problems of international investment have been taken care of which is a very good thing but this boost to manufacturing which we were expecting in this Budget has not come through. In fact as you rightly put it there are additional taxes on manufacturing.
Menaka: What stands out most for you and on the balance is it a plus Budget for corporate India?
Parikh: There were a lot of expectations on very specific things that the market had so if there were pain points in a variety of different areas then he seems to have methodically gone and addressed them. So foreign portfolio investment (FPI) - Minimum Alternate Tax (MAT) is a thing which came up now. From 1992 FPIs have been investing but we never had this MAT issue it popped up now and it is been dealt with.
There was AIFs needed a pass through, it is been sort of dealt with. Private equity (PE) risk for private fund managers based here managing foreign money was meant to have been dealt with for many years, has been dealt with. There were a lot of things which have got cleaned up as a result of that. This includes indirect transfers, the General Anti-Avoidance Rules (GAAR) deferral, so in that sense there were all of these kinds of things which had to happen and they happened and therefore it is clear.
They are in a way consistent with what the government has been saying that we will do things to make things easier. So it is helping to make things easier in some way or the other. Is it transformational? May be not, but is it helping things along, yes it is.
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