The Union Budget 2017 has generally seen positive reviews from start-ups and other industry sections even as it is being called a balancing act by the government. Some of the facets of the budget that have received attention are the emphasis on infrastructure development, the information about GST rollout being on track, as well as reducing FDI restrictions further.
Partha Iyengar, VP and Gartner Fellow, said the budget was notable for the fact that the government has maintained fiscal discipline and resisted the urge to come up with a populist budget given the upcoming elections.
“The biggest positive is the continued focus on infrastructure (roads, railway, housing, tier-II airports et al) in general and rural infrastructure (affordable homes, rural electrification) in particular, including e-infrastructure with the increased allocation to BharatNet (erstwhile NOFN). This will allow commercial activity to expand to the rural segment in a much more efficient manner, if the aim of achieving the broadband connectivity targets by 2018 is actually met,” he said.
He further called the continued focus on moving India towards a more transparent and digital economy as encouraging and said it would help capitalise on the long term gains of the painful demonetisation exercise. The move to curb black economy also bodes well for accelerated GDP growth as more of the ‘shadow economy’ becomes visible and integrated into the overall economic activity.
Rajeev Dimri, Leader (Indirect Tax) at BMR & Associates, said that though there were no major indirect tax related announcements, this was in line with expectations given that the nation is on the verge of transitioning to GST.
“Reassurance that the government is up to speed on GST implementation work (including IT preparedness) is good news. Also, commitment to initiate GST awareness / orientation for businesses starting next fiscal, reaffirms the collaborative and inclusive approach of the Government to effectively implement GST,” he said.
He further added that keeping the service tax rate unchanged and withdrawal of R&D cess were welcome and pragmatic decisions at this juncture for boosting economic growth of the country.
“R&D cess withdrawal in particular will encourage import of technology and complements the Make-in-India campaign. The stated focus areas of the budget 2017 are eliminating black money, promoting a digital economy by facilitating cashless transactions and increasing foreign investment. However, in view of impending GST, no major steps seem to have been taken from an indirect tax standpoint on these aspects. The announcement on the correction in excise and customs duty rates is largely to address duty inversion support the ‘Make in India’ initiative. The fine print would need to be analysed to determine the exact impact on businesses,” he said.
Bharat Rajamani, Executive Director & Solution Leader (Marketing & Advertising Risk Services (MARS), EY India said, “The budget was a fine balancing act between the need to push growth and to achieve it within fiscal constraints. The key takeaways include emphasis on rural economy, affordable housing and encouragement of digital transactions. The budget’s focus on digital transactions and rural digital network will encourage the FMCG, consumer durable, automobile and micro finance companies to explore innovative ways of utilising digital advertising in rural areas. The cap of Rs 3 lakh on cash transactions will bring about transparency and boost tracking efficiency in marketing. Further, the budget recognised Metro rail as an emerging mode of urban transportation which will again encourage brands to shift focus to transit media and make Out of Home (OOH) media more versatile.”
Speaking about the decision to abolish FIPB, Mukesh Butani, Managing Partner at BMR Legal, called it a bold move.
“The economic secretary of course cautioned that the existing FDI limits on defence, etc. and FDI in sectors that entail national security shall be subjected to controls. On the tax side, whilst there have been no big announcements, some proposals have been made to boost the foreign investment and provide relief to middle class individuals and MSMEs,” he said.