Not a bold Budget, but has many good features

The Union Budget for 2011-12 is “not a bold, game-changing Budget” but is, nevertheless, one that has many good features, feels Mr Gopal Srinivasan, Chairman and Managing Director, TVS Capital Funds Ltd.

Mr Srinivasan, one of the panellists at a post-Budget discussion organised by Business Line Club for the benefit of students, said this in response to a question as to whether there had been enough attention given in the Budget to investments in agriculture.

He said that a big disappointment with the Budget was the fact that the Finance Minister had practically said that the Goods and Services Tax was not going to come any time soon. “I suspect GST is gone,” he said, observing that the GST would have been a major economic reform measure.

Mr Srinivasan was also concerned about the rate of urbanisation of India. He pointed out that the previous Budget allocated Rs 11,000 crore to the Jawaharlal Nehru National Urban Renewal Mission, but only Rs 5,000 crore had been spent — indicating a lack of capacity to spend. The recent Budget allocates Rs 12,000 crore to the same Mission, he pointed out.

Speaking from a private equity perspective (TVS Capital Funds is an equity investor), Mr Srinivasan said that it was a disappointment that while shares of listed companies attracted no long-term capital gains tax when sold, shares of unlisted companies suffered the tax. This does not help entrepreneurs who want to attract PE funds, he said.

Expressing a contrarian view, Mr Srinivasan said he was happy that the Budget had not made huge increase in allocations to education and healthcare sectors, which he took to mean that the government was happy to leave these areas to the private sector.

He also noted that the revenue target through the disinvestment route — Rs 40,000 crore — was easily achievable. To illustrate this, Mr Srinivasan said that the combined market capitalisation of the public sector companies, ONGC and Coal India Ltd, was Rs 4,80,000 crore. It would not be a difficult task to raise Rs 40,000 crore by divesting a portion of government's holding.

Business Line 's Senior Associate Editor, Mr D Sampath kumar, who moderated the proceedings, noted that many other public sector companies, such as Rashtriya Ispat Nigam Ltd and Bharat Sanchar Ltd were ripe for initial public offering, and other companies such as ONGC and Indian Oil Corporation could see a follow-on public offering.

The other panellist, Mr R. Anand, Partner, Ernst & Young, exhorted the students gathered there to read the Action Taken Report, which is a part of the Budget papers.

He also called for the basic exemption limit in personal income tax to be linked to inflation, so that the threshold income after which tax becomes incident gets automatically raised in tandem with inflation.

Pointing out that the effective corporate tax rate (the tax that companies pay after availing themselves of exemptions) stands at 24 per cent, compared with 18 per cent two years ago, Mr Anand observed that the corporate sector was paying more taxes than earlier.

He said that problem government should address is how to get more and more people to pay tax. He noted that only 35 million out of the 1,200 million people in India paid tax.

Role of football coach

Mr Sampath Kumar raised a point about the extent to which the government should involve itself with economic activity. Mr Gopal Srinivasan gave the parallel of a football coach, who would stand by the side of the court screaming and shouting instructions but never enter the field, and said that the government should act in a similar manner, leaving the private sector to play.

Mr K. Venugopal, Joint Editor, Business Line , told the audience comprising around 400 students from some of the top B-schools in the city, that it was important that they understood the changes the Budget makes as they could affect them or their families. He told the students that they should count their blessings that they were growing up in a country distinguishing itself in the global arena and they would be entering their careers in a more developed country.

The title sponsor for the event was Saint Gobain and the associate sponsors Central Bank of India and Tata Photon. Other sponsors included Appy and Grand Sweets & Snacks. The media partner for TV was NDTV-Hindu. The students were drawn from SRM University, RMK Engineering College, RMD Engineering College, MOP Vaishnav, Vels University and Vel Tech College.

COMMENT NOW