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Manthan 2013 – Budget Discussion

It was an eventful day at TAPMI on Sunday, March 10, 2013 which witnessed one of the intriguing budget discussions by eminent personalities from the world of finance. The Panelists were Mr. Mitesh Thakar (Technical Panel Advisor, ET NOW, CNBC), Mr. Vishwanath J K (Chief Credit Officer, DCB) and CA. Ananthanarayan Pai (Secretary ICAI, Udupi).

Manthan 2013 was inaugurated by Prof. Sunil Kumar Parameswaran and Prof. Chowdari Prasad by igniting the lamp. A brief introduction about the event was given by Prof. Parameswaran. He also gave a brief introduction about the budget 2012-13.

The discussion began with the analysis presented by CA. Ananthanarayan Pai. The key parameters on which he emphasized were Revenue Deficit, Effective Revenue Deficit, Fiscal Deficit and Primary Deficit among others. He also spoke about the Interest Liabilities faced by the nation to the tune of Rs. 350000 Crores, Repayment of principal due for the next year to the account of Rs. 40000 Crores and Borrowing of not less than Rs. 50,000 Crores. With this, he inferred that India’s deficit to be converted into surplus in near future seems unlikely. On the front of fiscal deficit, he further clarified on how have India contained the deficit by reducing the planned expenditure like Infrastructure, Power, Roads etc. to the account of Rs. 96,000 Crores and unplanned expenditure like Interest payments, Subsidies, Defense, Defense (capital).

He spoke on some of the proposals given in the Union Budget 2013 regarding Infrastructure tax free bonds, Industrial corridors, FII and FDI and SMEs. Since his primary area of interest is Taxation, he elaborated the tax proposals to a detailed extent. According to him, the super-rich (any person earning an income of more than Rs. 1 Crore) who were earlier taxed at a rate of 30.9% will now be taxed at 33.99%. There are only 42,800 people reported to be in the super-rich category; he questioned the very essence of this new tax proposal. He advised that widening the tax base is a better measure than increasing the tax rate.

Further he spoke on the proposed rebate for the salaried people earning less than Rs. 5 Lakhs as a pessimistic amendment. He argued that the new Rajiv Gandhi Scheme which is introduced this year is a restrictive policy as it allows only those investors with income below Rs. 10 lakhs and who do not hold a demat account. Regarding the Housing scheme, he told that a permanent borrowing scheme should be introduced. He also spoke on Real Estate taxation and taxation on agricultural land which according to him is a policy covering only the “crow flight” distance and needs a proper mechanism. He was positive about the Investment amendments and was hopeful of a boost in the investment decision by the investors. He closed his analysis by speaking on the Sec-179 Directors Act, Service Tax and Filing of Tax Returns.

The second analysis was presented by Mr. Mitesh Thakar. He started off by explaining the impact of budget on FII, equity investors and rating agencies. He asked the question that how Finance Minister will be able to cut down fiscal deficit. The 2012 budget was focusing on revenue target which for the next year is estimated at Rs. 10,51, 033 Crores. Finance Minister is banking revenue growth at 21%. But the source of this growth is a big question in itself. He further spoke about the surcharge which will help raise Rs. 10,000 Crores. The present revenue deficit is at 5.2%. He emphasized in the fact that if Finance Minister removes the revenues earned by one time transactions, the deficit may shoot up to 5.6%.

He then moved to the sectoral analysis. He started off with the Infrastructure sector which he felt was a favorable move for the people at bottom of pyramid. He felt that the Financial Sector/commodities market and Petroleum sector was not included much in this budget. For the Auto sector, he felt that the budget presents a challenge for companies like M&M, and a positive sign for buses and commercial vehicle companies like Telco and Tata among others. He analyzed the impact on the Metal Sector as minimal, for the Reality Sector as a little negative, for the Road Sector as positive and for Textile Sector because of reduction in excise duty. He concluded by saying that overall it is a negative budget.

The last guest to analyze the budget was Mr. Vishwanath J K. He viewed the budget from a banker’s perspective. He focused on the tone of the budget which has changed over the years. He said that the credit growth is directly proportional to the GDP growth and is 2 to 2.5 times the same. According to him, the major contributors are Agriculture, Industry and Services. He said that looking at the food inflation which is at 11.3% as per the WPI; we have to earn a lot more than present. He said that the growth was more focused on the services sector which is unnatural for the economies like that of India. He was optimistic about the new regulatory authority for the Road Sector and the new policy regarding the Investment allowance.

He further emphasized that there are three levers of profitability – Income, Cost & Provisions. These three are impacting sectoral profitability. He spoke on the sectoral developments where he mentioned the need of R&D and efficient production in the Agriculture Sector, the tough period faced by the Automobile Sector and the Infrastructure companies not being able to make money and that they are in the phase of debt restructuring. Finally he concluded that there needs to be more income generation, widening the tax base, increment in the agriculture productivity. He particularly emphasized on the transition of workforce from Agriculture to Manufacturing to Services sector. He concluded by saying that the budget might be populist in the year of election and will be a watch year for the banking sector.

All in all, it was a very informative budget session for the students and faculties of TAPMI.