Posted at 11:17 AM , on January 27, 2020
No economist, policy maker or even CEO of an Indian company believes that the government would be able to hold 3.3% fiscal deficit in 2019-20. Some leeway is bound to be there in a year when outlays are growing and inflows have been tepid. But there are four key issues to tackle with the fiscal deficit.
Stay within the leeway
This year the government may not have much of a choice but to offer a counter cyclical approach to growth. It will have to give some leeway on the fiscal deficit front to propel growth but the question is how much? Ideally, the government should stick to the limits prescribed by the NK Singh Committee which permits a maximum deviation of 50 bps in an exceptional year. If the government can hold the fiscal deficit at less than 3.8%, it will be seen as a positive move. Continue reading
Posted at 12:50 PM , on January 20, 2020
Mutual funds have been disappointed over the last two years as there has been little respite in the Budget. This time around, mutual funds will look at parity on a number of areas plus a reversal of some of the recent measures pertaining to capital gains tax and the tax on distribution of dividends by MFs.
Time to bring in DLSS
While ELSS has become extremely popular as a tax saving instrument, one argument has been that it forces people to take on risk. The answer could be in extending these Section 80C benefits to debt funds too and introduce a separate DLSS classification for the same. Of course, the lock-in period can be either retained at 3 years or extended to 5 years. The idea is that conservative investors need not be penalized when their financial plan dictates caution.
Parity with ULIPs and NPS
This has been a persistent demand of AMFI over the last few years. The first demand is to put pension plans of mutual funds at par with the National Pension Scheme (NPS) in terms of tax benefits. That will entail extending the additional exemption of Rs.50,000 on NPS to pension plans too. Secondly, while equity MFs are subject to LTCG tax, the ULIPs are exempt from any form of capital gains tax. This puts the mutual funds at a disadvantage and AMFI has been demanding parity.
Posted at 5:54 PM , on February 9, 2016
Four themes that could drive the Union Budget exercise…
As the market prepares for another Union Budget on February 29th, the question is what can the economy and the markets expect? This will be Jaitley’s third consecutive budget and hence expectations will be high. While specifics may be hard to predict, we believe that there will be four broad themes that could form the theme of the Budget. Continue reading
Posted at 7:18 PM , on March 9, 2015
Minimum Alternate Tax (MAT) was introduced by Mr. P Chidambaram almost 2 decades ago to impute taxes based on book profits. Effectively, MAT was never an additional impost on companies. It only prevented companies from postponing their entire tax liability. When MAT was first introduced it was fixed at 7.5% of book profits. Over the last two decades; with MAT hikes and surcharge, the effective MAT has gone up to 18.5%. The Union Budget has issued some clarifications pertaining to MAT, although many critical areas were left untouched. Continue reading
Posted at 7:16 PM , on March 9, 2015
That is a question that is on the top of everyone’s mind. How will the rating agencies react to the Union Budget? Will they consider a favourable rating upgrade post the budget? These may be early days but the initial response to the Union Budget was that the rating agencies were disappointed. Most rating agencies would have required clarity on 3 fronts viz. Growth & infrastructure, fiscal responsibility and global vulnerability. One can argue that at 7.5%, India is the fastest growing large economy. In fact, by 2016 India’s growth rate will surpass China also. But, there other statistics that are revealing! In terms of GDP per capita, India ranks below nations like Bolivia, Bhutan, Georgia, Swaziland, Angola and Paraguay. If you look at literacy within BRICS, India is still at 74%, while other BRICS nations are above 95%. That is a long way to go… Continue reading