Budget 2016: Sustain path of fiscal farsightedness by monetizing assets

Nilesh ShahKotak Mutual FundFY 16 budget laid the road map of fiscal prudence by targeting 3.5 % fiscal deficit for FY 17. It encouraged global rating agencies to upgrade our outlook & FIIs to invest in our debt market. This year budget has to provide Rs 100,000 cr for implementation of VIIth pay commission recommendations. It also has to provide funds for public investment to keep economy on growth path. The Union Budget 2016 does have benefit of large savings on fuel subsidy due to lower oil prices. If the Budget raises taxes or borrowing to fund increased expenses, economy as well as market will be adversely impacted. If the Budget proposes to raise money by monetizing its assets from Land, Natural Resources & Spectrum to Investment in SUUTI market and economy will be positively impacted. Budget can consider following proposals to strengthen economic recovery and reassure investors on fiscal prudence.• Launch a Fast Track Settlement Mechanism for Disputed taxes to increase revenue collections. Excess Manpower can be deployed from fighting time consuming litigations to widening of tax base and improved compliance. Fear of law through better monitoring can improve India’s Tax to GDP ratio from African nations to south East Asian nation levels. • Introduce Super Rich Tax including wealth tax & succession tax to mobilize revenue and narrow social divide. Globally Estate tax is levied even on common citizens. Let the rich share tax burden like the salaried class. • Levy 2 % Wealth tax on Gold holding above a minimum level including on that held by Temples. Give exemption for investment in Gold Monetization Scheme so that domestic gold gets recycled. We must reduce our annual net gold imports of ~USD 22 billion. Let Domestic Saving support our Investment and job creation.• Curb the menace of Black money in Real Estate and Gold through improved governance. Appoint an appropriately empowered Private Co to buy real estate including land at declared value on behalf of government and monetize it. They should be incentivized with a large profit share. The entire dealing of black money in real estate will come to a serious halt with swift execution of such punitive measure. Track Video Recording of Buyers making cash payment at Jewellers to curb black money role in gold. • Tax super rich farmers on Agriculture Income & cap their fertilizer subsidy like LPG subsidy for rich people. • Encourage creative destruction by providing incentives to scrap aged automobiles. Goverments spend on such old vehicles will be far lower than taxes on replacement demand. The economy will benefit by way of lower pollution, better fuel efficiency and more jobs in auto sector.• Reduce the dependence on foreign savings by encouraging Indian savings to move into financial savings. Introduce “Jan Nivesh” yojna on the lines of immensely successful Jan Dhan yojna. It should encourage ease of doing investment by single KYC, simple documentation & appropriate distributor incentives. • Encourage retail investors to participate in PSU divestment through exclusive tax incentive. Incentives given will be far lower than divestment proceeds and will help in spreading equity cult to provide risk capital to entrepreneurs