Budget’s Housing And Rural Thrust, Political Funding Reforms Enthuse India Inc

In Budget 2017, Finance Minister Arun Jaitley focused on the housing sector and the rural economy in an attempt to revive consumption, which was hit by the note ban.

The Union Budget was expected to provide some relief to these sectors after demonetisation sucked out 86 percent of the currency in circulation. Infrastructure too needed a push to kickstart the investment cycle, even as the Goods and Services Tax regime is expected to be rolled out in the next fiscal.

Against this backdrop, did the government fulfill the industry's expectations? Here is what India Inc. thought of the Union Budget 2017...

Housing's Multiplier Effect

The infrastructure status for affordable housing will have a multiplier effect that will ripple into core sectors such as steel and cement, said Deepak Parekh, chairman of Housing Development Finance Corporation Ltd.

“Overall, the allocation and emphasis on the rural and the farm sectors has been much more than in the past, and rightly so... We need to increase our foodgrain production, we need to have rural development," Parekh said.

Also Read: Affordable Housing Gets Infrastructure Status, Higher Allocation At Rs 23,000 Crore

FMCG, Farm-Related Firms To Gain

Budget 2017 brings good news for people doing business in rural areas, said Adi Godrej, chairman of Godrej Industries. Agriculture-related companies, real estate developers and fast moving consumer goods companies will benefit, he said.

Among his group companies, Godrej Consumer Products Ltd. and Godrej Agrovet Ltd. stand to gain from the budget proposals, he said.

Also Read: Agriculture Credit Target Set At Record Rs 10 Lakh Crore

Room For Rate Cut

Increased tax collection and lower government borrowing in the current fiscal will help bring down lending rates in the near term, said Keki Mistry, vice-chairman & CEO, HDFC Ltd.

One of the important features of the budget is that the fiscal deficit target was not breached by more than what was anticipated, Mistry said.

Also Read: Budget 2017: Banks Get Higher Tax Relief On Bad Loan Provisions

Bad Loans Problem Inadequately Addressed

The government has recognised that the economy is slowing down and has taken the first steps to effect a revival, said Ajit Gulabchand, chairman of Hindustan Construction Company Ltd. (HCC).

The thrust given to the infrastructure sector, which now includes low-cost housing, as well as the government's focus on rural sector will translate into higher demand in the economy, he explained.

However, the budget did not adequately address the problem of non-performing assets (NPAs) currently threatening the banking system, Gulabchand said. He acknowledged however, that "the real problems of the bank is not something the budget can serve", adding that the government needs a plan of action to solve the problem.

A Pleasant Political Twist

While most corporate leaders were analysing the impact of Budget 2017 on their industries, Bajaj Auto Ltd.'s Chairman Rahul Bajaj lauded the proposal aimed at reforms in electoral funding.

Also Read: Finance Minister Proposes Rs 2,000 Limit On Cash Donations To Political Parties

RC Bhargava, chairman of India's biggest carmaker Maruti Suzuki India Ltd., also praised the finance minister's attempt to put an end to anonymous political funding. Never before in any budget has this problem been raised and a solution to it given, Bhargava said.

He, however, raised doubts if digitalisation or the Goods and Services Tax will help solve the problem of non-compliance in taxation.

Wide Coverage

Sunil Munjal, joint managing director of Hero MotoCorp Ltd., said there was a dramatic increase in infrastructure spending and focus on sectors like housing that have a multiplier effect. Budget 2017 covered a wide area, but Finance Minister Arun Jaitley left out indirect taxes, which will get covered under the Goods and Services Tax regime in a few months, he said.

While the auto sector had no specific demands, the industry needed infrastructure to improve, Munjal said.

Consistency In Direction

Pawan Goenka, managing director of Mahindra and Mahindra Ltd., said the budget focused on everything the government has talked about in the past two years.

He said the proposals regarding long-term capital gains tax will quell fear around it in the market. Among the other positives were no increase in excise duty and a reduction in tax burden for micro small and medium enterprises.

However, Goenka was disappointed that there was no reduction in the corporate tax rate despite the time being right for it.

Also Read: Budget 2017's Impact On Your Wallet

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