While the macro-economic indicators in the budget are important, what is critical is how the proposals are put to action, writes DK Vyas.
The promises of ?Acche Din?coupled with the the ?Big Bang? expectations from the FY16 Union Budget, are more to do with the government walking the talk and bringing in continuous reforms which positively impact the financial and economic landscape. To me, this budget has walked the talk from an initial announcement perspective. It has addressed both the mid and long term needs of all the three sectors - primary, secondary and tertiary.

The announcements on reforms and initiatives in corporate tax rationalization, abolishing wealth tax, 2 per cent higher surcharge for the super-rich, infrastructure, rural credit, foreign investments, Information Technology, skill development, state empowerment, monetisation of gold, health insurance, life insurance for the poor, postal network utilization for direct transfers, new bankruptcy code etc, are all innovative and forward looking. However, it would be prudent to balance the euphoria with an analytical watch on the execution of policies, along with understanding the fine-prints for the benefit of our industry.

The tough stance taken by the government to curb black money is a welcome and much needed step. Especially, since a large undisclosed parallel economy has the potential to erode the overall development road-map. Therefore, anything done to stop leakages in investment multipliers would have fundamental and long-term positive impacts.

NBFCs and infrastructure

For us, the specific high points are as follows:

• Announcement of NBFCs to be considered as financial institutions and allowing access to ARCs under the SARFAESI Act is a significant benefit for us. We have been continuously representing to the regulators to provide a level playing field with the banks, since NBFCs reach out to more unstructured customers than the banks. This is indeed a welcome move.
• Budgetary allocation of Rs 70,000 crore coupled with tax-free bond of various infrastructure projects and creation of a new Infrastructure Corporation having an expected annual inflow of Rs 20,000 crore. Capex increase of PSUs from Rs 80,444 crore to Rs 317,889 crore will also fuel the growth engine.
• Reforms recommended in the PPP guidelines with government proposing to take majority of the risk with respect to clearances which are beyond the control of the private sector.
• Plans to build another one lakh km of roads with one lakh km already under construction and also corporatisation of public ports.
• Creating a single portal (single-window system) for 14 clearances with an objective to increase ease of doing business in the country. Further, ?Plug and Play? norms, i.e., where projects will be auctioned to private players post all clearances like land acquisition, mines allocation etc. We understand that while this will initially be offered to five ultra-mega power projects (UMPPs), it may also be later extended to other port and airport projects.
• Creation of a holding company for public sector banks for easy recaptilisation would also help banks to focus more in financing of long term infrastructure projects.
• Currently, around Rs 8.7 lakh crore of projects are stalled for one reason or the other. The move to table the Public Contract (Resolution of Disputes) Bill is a step in the right direction.

As mentioned earlier, the tone of the budget is reforms and growth oriented. It envisages achieving a GDP growth in the range of 8.1-8.5 per cent and has slipped from the earlier fiscal deficit projections by 30 basis points, i.e., from 3.6 per cent to 3.9 per cent, however projecting to achieve 3 per cent within the next three years. In our view, while these macro-economic indicators are important; what is critical is how the proposals are put to action.

The budget must not be seen as the single-day announcement event, but as a strategy, roadmap for measurable time-bound deliverables. We are more eager to see the fruition of these strategies on the ground for which we would, like before, work together with the industry and law makers effectively.

Tax reform in leasing is a critical requirement for our industry to thrive. We have been pursuing with the government for long. For a country like ours, where majority of the infrastructure players are small contractors, leasing is an extremely cost-effective tool. For unlocking small entrepreneur potential in construction, the leasing industry needs a revival. Leasing is confused by tax authorities both as a Sale as well as a Service and thus taxed multiple times, thereby eroding its effectiveness. This expected reform was missing in the budget.

We also did not hear of any tax holidays being announced for long tenure infrastructure projects. Amidst many positives in this budget, we were looking forward to these long standing requirements being addressed.

Summing up, this budget has several large positives that will accelerate the growth of the country. However, we would have been even more satisfied if a few points specific to the equipment finance sector were addressed. Our view is that the overall economic growth momentum will soon pick up speed led by the infrastructure sector. This directly impacts the equipment finance sector where we are present. We are enthusiastic to spread the word of positivity among our OEMs, vendors and customers and believe that the industry is positioned for a quantum jump from here.

I strongly believe that the budget must not be seen as the day?s event but rather be seen as a strategy road-map for tactical deliverables.

The author is Chief Executive Officer, Srei BNP Paribas.