Modi's maiden Budget focuses on growth, narrowing down deficit

NEW DELHI, JULY 10 :The maiden Budget presented by the

Prime Minister Narendra Modi's new government on

Thursday emphasized on structural reforms seeking to to

revive growth and cutting down fiscal deficit while setting

aside temptation to resort to higher borrowing.

Finance Minister Arun Jaitley in his Budget speech said that

he would uphold the fiscal deficit target despite

expectations he would be forced to raise it as a result of

weak revenues and high subsidy costs.

He added that said he would raise caps on foreign

investment in the defence and insurance sectors, but still bar non-residents from taking majority control

in projects to supply the world's largest arms buyer.

In another initiative the Modi Government will launch a tax reform this year to unify India's 29 states

into a common market, a measure that economist say would boost revenue and at the same time make

it easier to do business.

India's 1.2 billion people were "exasperated" by the weak economy, Mr Jaitley said vowing that India

would expand at an annual rate of 7-8 percent within three to four years.

"We shall leave no stone unturned in creating a vibrant and strong India," he added.

"It seems to be a neutral budget with positive light on the key economic variables to tackle the current

stagflation," said Shakti Satapathy, a fixed-income strategist at AK Capital in Mumbai.

He vowed to adhere to the "daunting" budget deficit target - of 4.1 percent of gross domestic product

(GDP) for the fiscal year ending March 2015 .

Mr Jaitley said he wants a solution by December on introducing a national Goods and Services Tax (GST),

promising that the government would be "more than fair" in its dealings with India's states on how

revenue would be allocated.

The Budget increased limits on foreign investment in defence and insurance ventures to 49 percent

from 26 percent. Foreign contractors had sought a higher threshold to justify sharing technology when

they locate operations in India.

Mr Jaitley assured investors a stable tax regime adding that the government would not "ordinarily"

create new liabilities restrospectively, but stopped short of scrapping the law.

Slew of cases in the court will be expedited through the legal process, he added.

MARKET REACTIONS

Atul Gupta, Joint MD , Earth Group of Company :

"The Budget will help in catalyzing real estate growth. Tax benefits forwarded to people specially I-T

exemption against housing loan interest will help in building a positive buyer sentiment. Increase in tax

slabs by Rs 50000 will further strengthen common men's hope of owning a home; turning their dream

into reality.

Also the schemes announced by the Finance minister for improving infrastructure such as sanitation and

electricity, boost in medical facilities and increase in education hubs and a special initiative of

developing 100 smart cities with an investment of Rs 7060 core will boost real estate shift from key

cities to other untapped cities which again is a very positive sign."

Gagan Banga, Vice Chairman and MD, Indiabulls Housing Finance :

“The Finance Minister has presented a balanced budget considering the limited time frame and the

current state of the Indian Economy. However the budget lacks the much awaited big bang reforms.

The Budget is extremely positive for the housing finance sector as affordable housing is set to gain the

maximum from the increase in tax rebate on housing loan interest repayment from Rs.1.5 lakh to Rs.2

lakh and increase in exemption under section 80C from Rs.1 lakh to Rs.1.5 lakh for principal repayment.

The effective interest rate on a Rs.25 lakh home loan at 10.25 per cent per annum will come down to

5.75 per annum.

Affordable housing will further get a boost with the allocation of Rs.4000 crore to NHB for lending to the

urban poor, EWS & LIG and Rs.8000 crore for rural housing.

Additionally, the removal of minimum size requirement for FDI projects with 30 per cent or higher low

cost housing component will further help in development of the housing sector in India.”

Ravi Dawar , Director , Finance, BD India (Becton, Dickinson and Company), India :

The budget does appear to have a long term vision, through its special focus on upliftment of poor by

providing better facilities, including Health, Sanitation, Driking water, Power and Housing etc. Further,

there is focus on infrastructure by promising more ports, airports, highways and cheaper loans for

infrastructure, is very welcoming and will definitely help reboot the economy. Excise duty cuts on

consumer goods like TVs, footwear etc. will spur consumer demand and hence economic activity.

Further, it is aiming to bring in stability and certainty under the taxation regime and restore investor

confidence. This is supported by launch of non adversial measures for dispute resolution at various

forums. Also it not considering to introduce any retrospective amendment and to improvise on the past

retrospective action during its tenure by forming a committee under realm of CBDT will boost investor

confidence. Although no conclusive announcement on doing away with retrospective tax laws is a

disappointment.

Prateek Kumar, MD , NeoNiche :

Currently, we are at crossroads where certain things will help in easing the pressure on common man,

while it can help ease inflation and will also create job opportunities..... My wish list from this union

budget would be :

Tax exemption for senior citizen upto 5 lakhs

Tax exemption for women for 5 lakh

Tax exemption under 80c for 2.5 lakh

Direct tax code

CSR mandated for all companies

Special fuel exemption for tax bracket of 30 percent

Exemption on housing loan interest to be increased to 2.5 Lakhs