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  • Mr. Irfan Razack – CMD, Prestige Group views on the Budget 2011

    Published on March 1, 2011

    On the whole, the budget has been neutral and industry-friendly.

    The budget speech indicated further progress on the Direct Tax Code (DTC) as well as the GST – both critical measures, which is a welcome move. Though, I feel that it would have been better for the industry if GST was also rolled out along with the DTC.

    Reduction of surcharge on corporate incomes is again a positive move. There was a lot of nervousness in the market about the indirect taxes – the market has actually heaved a sigh of relief because there was nothing negative on this.

    What the budget has missed in my opinion is the announcement of reforms such as allowing FDI in sectors like retail, broadening of ECB Norms, higher interest deduction on home loans etc. which may have had a positive impact on the demand for housing.

    Apart from the planned reduction in fiscal deficit, another huge positive from the budget has been the FM’s efforts towards procuring more funds for investment, especially into infrastructure.

    The FM has increased the FII limit of investment in corporate bonds by a significant US$ 20 bn and reduced withholding tax on interest to 5%. Thrust on infrastructure continues with the allocation of INR 2,140 billion (~ 23% up) which constitutes 48.5% of plan expenditure.

    In this budget, there has also been a greater emphasis on affordable housing. With low-cost housing loans upto Rs 15 lakh (value of house has been increased to Rs.25 lakh from Rs. 20 lakh) being eligible for a one per cent interest subsidy, we can expect to see an increase in demand for such houses. Especially, given India’s dire need for more affordable housing, this can be seen as a welcome boon for this segment.

    I will need to see the fine print to comment about the impact of MAT on SEZ. A similar provision was proposed on the DTC. It appears as if the same has been advanced by a year.

    Finally, given the present circumstances, I believe that it is overall a good budget.