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Rediff.com  » Business » Experts weigh in on positive and negative of Budget

Experts weigh in on positive and negative of Budget

March 01, 2013 10:57 IST

In the middle of high expectation from common man, investor and business community, Finance Minister has given very pragmatic and workable budget, says Umesh Revankar-MD, Shriram Transport Finance.

As the FM was giving an indication that he would like to focus on fiscal deficit, the expectation was of low on plan expenditure but he surprised with increased plan expenditure proposal which is 29.4 per cent more than the previous year. This certainly is growth oriented budget if only the target is achieved.

Focus on rural development with Rural Expenditure of Rs 80,194 crores is good as it is the rural consumption and agriculture allied produce which is showing handsome growth. This will bring rural prosperity and helps in integrating rural economy with larger economy of India.

Meanwhile he has also addressed small and medium scale industry encouraging them to grow and get to higher category by giving 3 years extended period by extending the tax benefits.

Small Industries Development Bank of India Refinance Fund to Rs 10,000 crore  is again good news for SME segment.

Proposal of investment allowance for more than 100 crores investment is good for encouraging manufacturing. The proposal for regulatory authority for road sector and the proposal of road infrastructure in North East and connecting into Mayanmar would help the North East Indian states and also increase the trade with Asean countries and China.

He has also tried to address the bottleneck in power sector by announcing that government plans to encourage PPP projects along with Coal India.

He also said blocked NELP blocks will be cleared and there will be a policy on shale gas based on revenue sharing.

Putting the capital Into Public sector banks in the next years by Rs 14,000 crore also reflects that Government intentions to increase credit supply to help the growth of economy.

Announcement of India’s first woman bank with Rs 1,000 crore capital is another great initiative.

Typically woman in town and rural hesitate to visit bank and remain financial ill-literate. Encouraging woman to take part in banking activities will bring better financial decision among household.

Probably the biggest positive is that the insurance laws amendment bill which seeks to increase of FDI from 26 to 49 per cent is tabled in this budget session and the FM is hopeful of it getting passed.

So that’s positive to begin with for the sector.

Clarification on FDI and FII investment again gives lot of clarity to foreign investors and attracts more investment into Indian market.

The FM has exempted the Securitization Trust from income tax in order to facilitate financial institutions to securitize their assets through SPVs, the tax now will be levied only at the time of distribution of income by the Securitization Trust.

No further tax will be levied on the income received by the investors from the securitization Trust.

So this double taxation issue which many banks were talking about which made them a bit apprehensive towards buying securitized assets is now resolved.

This should help all the asset financing companies to raise resources.

Agricultural and Allied Industries growth 3.6 per cent with record output of 2.50 MT is good news and increase in rural consumption would augur well for future of country.

Enhancing the refinancing capability of SIDBI from the current level of Rs 5,000 crore to Rs 10,000 crore per year will benefit over 3.5 lakh MSEs, says TR Bajalia, Dy. Managing Director, SIDBI.

The Union Budget 2013-14 embodies strong features of promoting investment and putting the economy on the high growth path leading to inclusive and sustainable development. With a view to giving boost to small and medium enterprises, some of the benefits extended through the sector include:

1. Enhancing the refinancing capability of SIDBI from the current level of Rs 5,000 crore to Rs 10,000 crore per year. This is helpful in providing credit facilities at affordable rate by SIDBI to micro, and small enterprises through banks and SFCs. This will benefit over 3.5 lakh MSEs. The Budget is quite progressive for the growth of MSME sector.

2. SIDBI set up the India Microfinance Equity Fund in 2011-12 with budgetary support of Rs 100 crore to provide equity and quasi-equity to Micro Finance Institutions. An amount of Rs 104 crore has already been committed to 37 MFIs. Keeping in view the unmet demand and need for improving capital base of the smaller & medium sized MFIs to enable them to raise additional funding, Hon’ble Finance Minister has provided an amount of Rs 100 crore in the Union Budget to the IME Fund. This is expected to expand reach of 60-70 additional MFIs, benefiting more than 12 lakh additional clients, mostly women.

3. Last year, Factoring Regulation Act was enacted to pave the way for orderly growth of factoring services in the country. However, the volumes and coverage of factoring are yet to witness any perceptible growth. In order to promote the tool of financing for the benefit of small suppliers, the Budget has proposed a corpus of Rs 500 crore to SIDBI to set up a Credit Guarantee Fund to extend guarantee cover for facilitating factoring transactions in respect of SMEs. The corpus shall help in leveraging the volume of factored debts at a much higher scale (up to Rs 10,000 crore pa).

4. Micro, small and medium enterprises have a large share of jobs, production and exports. Many of the SMEs do not graduate the higher category for the fear of losing the benefits associated with staying small/medium. To encourage them to grow, the Budget has proposed the continuum of benefits enjoyed by them for upto three years after they grow out of the category in they obtained the benefit. A beginning in this direction is proposed to be made by extending the non-tax benefits to the eligible units for three years after they graduate to a higher category.

Other measures announced in the budget for MSME sector include: assistance of Rs 2,200 crore during 12th Plan period for setting up 15 Tool Rooms and Technology Development Centres by the Ministry of Micro, Small and Medium Enterprises Rs 2400 crore under Technology Upgradation Fund Scheme for the textile sector, setting up of Apparel Parks under the Scheme for Integrated Textile Parks, implementation of a new scheme called the Integrated Processing Development Scheme with an outlay of Rs 500 crore to address the environmental concerns of the textile industry, and availability of working capital and term loans at a concessional interest to handloom weavers.

Re-introduction of GBI will not only boost the wind power market in India but will also encourage more investments from both domestic and foreign IPPs which will benefit the economy, says Kailash Tarachandani, CEO Kenersys India Pvt Ltd.

It’s a welcome note for the already ailing wind industry market and should attract more investments in the sector. We welcome the government initiatives in re launching GBI for wind energy projects. This will help the wind industry to regain its momentum.

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