The present glaring issue for the economy has been to infuse funds for a demand pickup — for the agriculture sector, for NBFCs and for infrastructure spend, so as to enable the nation to be back on the growth track. Finance minister Nirmala Sitharaman has endeavoured to address most of the issues with a medium to long-term vision.
In order to take the economy on to a higher growth trajectory, stepping up infrastructure investments is a must. Therefore, for me, the biggest takeaway is perhaps the announcement of allowing Sovereign Wealth Funds (SWFs) 100 per cent tax exemption for investments in Indian infrastructure projects. The other important announcement was the increase in the FPI limit for corporate bonds from nine per cent to 15 per cent. This, coupled with the laying out of the red carpet for SWFs at this juncture, is very good news for Indian infrastructure projects as it will enable long-term funds, both equity and debt, to be invested in India. The global financial markets are flush with abundant funds.
The decision on Dividend Distribution Tax, which has been on the expected lines, is likely to make investments in India more profitable.
On the infrastructure front, one of the notable announcements was to bring the power sector in line with manufacturing companies and provide a concessional tax rate of 15 per cent on the new domestic generation companies. However, I hope the existing power generation companies and the distribution companies should also be included in due course. I welcome the announcement that the Centre would now prod all state governments to adopt smart metering. This can do wonders in improving the financial health of the discoms.
I also welcome the decision to set up a body for improving the modalities of settling commercial disputes. This is something which needs to be fast-tracked.
The finance minister has done well in paying adequate attention to the needs of the tech-driven New Economy and stepped up allocations for fostering the startup ecosystem and incentivising skilling initiatives. Allowing tax benefits to startups by way of deduction of 100 per cent of their profits and increasing the turnover limit and period of eligibility are in the right direction and will encourage both innovation and talent grooming.
The decision to liberalise external commercial borrowing (ECB) and foreign direct investment (FDI) norms for development of institutes of higher skills was also very reassuring. If India has to emerge as a global power, we need to quickly scale up the capacity of our higher education ecosystem.
On the personal income-tax front, once we go through the fine print, we can comprehend better as to the modalities and advantages of the new optional income-tax rate system and how useful it would be in increasing consumption demand. On the real estate front, the finance minister has extended by one year the date of approval of affordable housing projects for availing a tax holiday on profit earned by developers and also the additional `1.5 lakh tax benefit on interest paid on affordable housing loans. Given the huge inventory buildup in the real estate sector, and the fact that this sector is a huge employment generator, I was expecting more incentives.
On the resource mobilisation front, the decisions to offload a part of the government’s stake in the Life Insurance Corporation and to sell off the entire government stake in IDBI Bank were noteworthy. It was reassuring to hear from the finance minister that the proceeds from such disinvestment will be mostly used for capital expenditure.
The extension of the Partial Credit Guarantee Scheme for NBFCs will surely facilitate them and I am sure we will soon hear good news for the sector that can address the liquidity availability in the medium to short-term basis.
The decision to increase the Deposit Insurance Coverage from Rs 1 lakh to Rs 5 lakhs per depositor will be a huge relief and will encourage further savings, which can be channelised to fund infrastructure and industrial projects.