Views on Union Budget 2020-21 by Prem Rajani, Managing Partner, Rajani Associates

One reason of cheer for the MSME bracket is the loan restructuring window, which was to originally end in March 2020, but is now proposed to be extended until March 2021.

Feb 05, 2020 08:02 IST India Infoline News Service

Prem Rajani
“In my opinion, there are two announcements that stood out which will certainly catch the interest of everyone: 1) the Government’s proposes to sell a part of its holding in LIC by way of the initial public offer (IPO) and 2) initiatives proposed to simplify income tax filing with the new proposed tax regime.
 
From a sectoral focus, the budget lays emphasis on:
 
Infrastructure: Infrastructure remained one of the Budget’s core focuses by introducing a slew of measures, towards the development and scaling of the sector. The National Logistics Policy which is to be released soon will be welcomed by the stakeholders as it will offer clarity in the role of central, state and key stakeholders. The initiatives towards developing 100 airports and national highway will result in direct and indirect employment. These initiatives will also spur investor interest in investing within the sector. Another very positive initiative is the proposal of 100% tax concession to sovereign wealth funds on investment in infra projects. These initiatives will also spur investor interest in investing within the sector.
 
Technology: Keeping the digital-first approach of this Government in mind, the Hon'ble Finance Minister is correct when she says that Digital India will see the next wave of development and encourages initiatives towards Machine Learning (MA), Artificial Intelligence (AI), fin-tech, quantum computing. From a legal perspective, companies will need to make consistent effort to ensure adoption of technology to catalyse efficiency in compliance, risk and ethics policies.
 
Start-ups, SME and MSMEs: One reason of cheer for the MSME bracket is the loan restructuring window, which was to originally end in March 2020, but is now proposed to be extended until March 2021. The Budget also will be welcomed by start-ups as they can now breathe a sigh of relief given the increase in turnover from the previous limit of INR 25 crores to now INR 100 crores. This will relieve the tax burden on employees eligible for employee stock options (ESOPs). However, an important focus area for startups will remain Intellectual Property Rights (IPR), for which, although the Government has proposed initiatives, legal and industry expertise will be pertinent.
 
Banking: The Government has made commendable efforts in securing the interest of depositors by increasing the deposit insurance from the previous INR 1 lakh to now INR. 5 lakh. This should comfort depositors as they have been assured that the Government is making efforts to ensure that their deposits are safe and secure. The Government has also reemphasised that the reforms of the banking sector remain a priority. For NBFCs the eligibility limit for NBFCs for debt recovery under SARFAESI Act has been proposed to be reduced to an asset size of Rs 100 crores from Rs 500 cr earlier or loan size of Rs 50 lakhs from Rs 1 crore previously. This will definitely result in more NBFCs being able to work towards debt-recovery. The Government also plans to increase the investment limit of Foreign Portfolio Investors (FPI) in corporate bonds from 9 per cent to 15 per cent. This initiative again will definitely catch investor interest and the economy will see greater investments coming in.
 
In our opinion, the Budget definitely attempts to drive economic growth by way of new bold introductions. Although the Budget did not touch upon the revival of the real estate sector or how the Government plans to address banks related challenges around NPAs, there are several initiatives in newer areas that if implemented well, could help spur economic growth. However, the devil lies in the details and further examination of the fine print can shed more light” - Prem Rajani, Managing Partner, Rajani Associates.           

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