Based on the Budget 2018 announced today by the Finance Minister, a short viewpoint by Prem Rajani, Managing Partner, Rajani Associates on aspects related to long term capital gains, infrastructure, disinvestment, capital markets, financial lending and real estate.
The Budget 2018 has touched upon almost every sector, while not disrupting the overall economic environment. It aims to provide the necessary push in field of infrastructure, farming, rural household provisions, education, and biggest of all, healthcare, for the common man. The Government continues with gusto towards developing India’s road and real infrastructure. From an industry perspective, we have seen focused efforts to support lending through loans schemes, promotion of NBFC’s and other incentives.
- LTCG Tax on Securities: The Finance Budget 2018 re-introduced long term capital gain tax on sale of shares of listed entity and units of mutual funds at the rate of 10% on prospective basis (i.e. all gains upto January 31, 2018 will not attract long term capital tax). While this move will enable the government to collect tax on sale of securities of listed entity, which was otherwise exempted for almost 14 years, there are two important aspects on sale of securities which the Government must assess and provide for (a) non-levy of the securities transaction tax (which was introduced in the Finance Budget of 2004 in lieu of the tax on long term capital gain), and (b) making available the indexation benefit on securities held for more than one year.
- Infrastructure: Through initiatives such as Bharatmala Pariyojana, AMRUT and Rashtriya RailSanraksha Kosh, the Government has reaffirmed its commitment towards the infrastructure sector, which will boost investor interest. The Indian railways will definitely benefit significantly from the announcements made today. Telecom infrastructure, too, should see momentum. With initiatives to revive interest towards InvITs and ReITs, we expect investor interest around these financial instruments.
- Strategic Disinvestment: The biggest goal set by Budget 2018-19 is the disinvestment target of Rs. 80,000 crore. The Government will need to continue its sustained efforts in 24 identified CPSE’s in order to achieve this goal. This will go a long way to help fund key projects.
- Capital Markets: Market regulators are looking at fresh liquidity through the bond market. The regulators are looking to nudge large corporates to address one-fourth of their financing needs through the bond market. This is something, we believe, a larger number of businesses should explore with interesting options available currently.
- Financial Lending: From a corporate and banking perspective, we are pleased to see greater attention provided to resolving NPAs of MSMEs, as till now, many initiatives were directed towards addressing of large NPAs. Initiatives towards NPAs for MSMEs will help in the cleaning up of stressed assets to a great extent and also help improve bank lending towards this segment. The linking of loan sanctions to SME’s with GSTN through the GSTN online portal would improve the time taken for loan sanctioning.
- Real Estate: Reaffirmation towards housing for all along with the Affordable Housing Fund (AHF) in National Housing Bank, will certainly provide a boost to the real estate sector, to sustain its progress towards housing for everyone by 2022. With the implementation of RERA, this would be a good time for developers to further focus on the affordable housing segment, especially in tier II and III cities of India.
In our opinion, while the Budget seems overall positive, what remains to be seen is the implementation of these initiatives that can propel the development of the public, private and social sector.