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Last Updated : Mar 01, 2016 08:02 AM IST | Source: CNBC-TV18

Budget sensible but not transformative, feels Gita Gopinath

Yogendra Yadav, Social Activist, also says with two consecutive droughts, the ride in Budget allocatment for agriculture and Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) is only marginal.

Through the Budget for 2016-17, the Finance Minister has put a lot of money in the hands of farmers and in effect bolstered the rural economy, says Mohandas Pai, Chairman of Manipal Global Education.

Speaking to CNBC-TV18, Pai says the FM has brought credibility for the first time in 5 years by announcing measures to resolve agriculture, infrastructure, social and rural sector issues. However, he expressed disappointment on the the middle class not being given out the changes in tax slabs it wanted.

Backing Pai, Pawan Goenka, ED, Mahindra & Mahindra (M&M), feels this Budget will boost the rural economy and the company's  tractor business will benefit from it, given there is a good monsoon this year.

Although unhappy about the cess on automobiles, Goenka says the auto industry will have to take it in its stride. He hinted that the cess will be eventually passed on to the customers but declined to provide a timeline.

Adi Godrej, Chairman of Godrej Group says, the FM has done a good job by sticking to 3.5 percent fiscal deficit target. Harshavardhan Neotia, President, FICCI, also seconded Godrej's opinion. 

Expressing a contrary view, Gita Gopinath, Professor- Economics, Harvard University, says the event was sensible but not transformative. "In terms of missed opportunities, government should have implemented privatisation of public sector enterprises which would have made it truly transformative," Gopinath adds.

Yogendra Yadav, Social Activist, also believes the government could have done a lot better on allotment for agriculture and Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA).

Below is the verbatim transcript of the interview

Q: Mr Chidambaram has come out and said it is an accountant\\'s Budget. There is nothing new. There is no big ticket idea as far as this Budget is concerned. The majority opinion and corporate leaders who we have been speaking to including viewers who have been tuning in - over two lakh votes coming in on our Twitter meter seem to suggest that they are neutral as far as this Budget is concerned. Big highlight of course the promise on the fiscal deficit front has been achieved, has been delivered. How would you sum up Arun Jaitley\\'s Budget?

Pai: P Chidambaram (PC) should not talk about it looking at his last three Budgets because he neither met the revenue numbers. The revenue numbers were inflated. The costs were brought down because he didn't have the money and tax terrorism rose to the height during PC's regime. Yes, he had a broken down economy, he did well but I don't think he should make these comments on the big idea because he didn't have any big idea in the three Budgets that he did.

The comments for this Budget, first the Finance Minister has brought credibility to the Budget numbers because for the first time in five years the RE is higher than BE for both the revenues and expenditure and he stuck to 3.9 percent without fiddling with the numbers. And for next year he has brought it down to 3.5 percent. Next year the interesting thing he has under accounted the revenues by maybe Rs 30,000-40,000 crore. If you look at the Budget numbers excise duty has gone up by 11.5 percent whereas the run rate should give you at least 15-16 percent.

Second, he has put lot of money into the farmer's hand. He has put money into infrastructure, he has put money into health and social sector and the rural areas. So, he is trying to correct the problem that exists at the bottom of the pyramid which is good news because that will create a sustainable economic development.

Two things which he has not done is hurting the sentiment is the middle class wanted an increase in the slab rates. Instead of that he has fiddled with some small exemption which is not what people want because people must have choices and he has taken away the benefits of EEE for retirement benefit and for corporate side he has given it for new companies. New companies are not going to pay tax for three years at 25 percent. And for the bigger companies he brought it down because 60 percent of the total corporate tax is from the service sector and the service sector is employment generating sector and he should have bought it down from 30 to 29 percent a small relief. But instead of that he just did some fiddling, gave it for companies less than Rs 5 crore. These two are disappointment.

But overall I have given 8 out of 10 because it is a very far reaching Budget. If it works well it will transform agriculture, infrastructure and the rural side in a very significant way.

Q: We have heard what some of our panellists have to say. What do you make of the Budget. Mohandas Pai rating it 8 on 10, how would you rate it on a scale of 1 to 10?

Godrej: If you look at the global situation and if you look at the Indian demand situation it has been a good Budget. I would rate it at about 7. The best point of the Budget is the Finance Minister has done a good job in sticking to the 3.5 percent fiscal deficit ratio to GDP. That will be very good. I do hope RBI soon reduces the rates because they will see their objectives being met.

There are some very good provisions in the rural sector, agri sector. There have been good provisions in the rural electrification, to social sector allowing shops to stay open for all seven days of the week is a good provision. There have been some good provisions in the real estate sector. Rental income exemptions will be much higher now. Interest deductions will be better. Affordable housing gets some incentives now and very importantly the dividend distribution tax on Real Estate Investment Trusts (REIT) has been removed. So, the real estate sector will certainly get a fillip from this Budget. So, overall the Budget has been good and let us hope it adds to GDP growth in the country.

Q: On balance you have seen a positive movement as far as alleviating the pain on the rural economy is concerned. However specifically for auto companies it is negative because of that infra cess that has been imposed for small cars upto 1200cc run on petrol and LPG, 12.5 percent excise plus 1 percent additional excise. So, that cess is actually acting as an additional excise hike?

Goenka: Overall it is a very good Budget. If you recall when we talked pre Budget I had summarised by saying three things that we would like to see a lot of initiatives on agri and infrastructure, that has happened. I had said that I would like to see no new initiatives and there are no new initiatives that came in, no new schemes but implementation of existing schemes and I think that is coming in very strongly. Also I had said not to move the needle on the fiscal deficit and many were surprised that he did maintain 3.5 percent. So, overall I cannot be unhappy about the Budget.

I cannot be happy about the cess that has been imposed on automobiles but we have to take it in stride. To some extent the auto industry now has come to expect that every Budget will have some new tax burden that will come on it for one reason or other.

Q: Will you pass this on as early as tomorrow morning?

Goenka: I cannot say that right now but we certainly will have to pass it on. Our CFO is working on the numbers right now to see what it means for us and what do we need to do. Whether it happens tomorrow or few days later we will have to pass it on.

Q: The government sticking to its fiscal consolidation roadmap. Do you believe it has been able to ring fence itself from the ire of rating agencies?

Gopinath: I agree with the other panel. One of the best parts about this Budget which I would describe as sensible, I would not describe it as transformative despite its title of transform India, it is a very sensible Budget. It is a good Budget. I do like the fact the Finance Minister decided to stick to its fiscal target despite pressures coming from other sources. That is probably the best part of the Budget.

In terms of missed opportunities which would have made it truly transformative which it hasn't is with regard to privatisation of public sector enterprises. There was no mention of it. It is not one of the main colours that is listed out there.

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First Published on Feb 29, 2016 10:00 pm
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