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Nimesh Kampani

THE Budget is growth-oriented. I compliment the Finance Minister for doing a good job, keeping in view the constraints he had. The removal of the FII cap on investments in Indian companies will benefit the Indian capital markets considerably. Forex flows will be further strengthened by the positive step of NRI capital account convertibility. The abolition of the flat 10 per cent dividend distribution tax and its substitution by taxation of dividends at the hands of recipient will benefit small investors not falling in the tax bracket or falling in the lower tax bracket. The effect is mixed for corporates as they will not have to pay any dividend distribution tax and can set off the dividends received against the dividends paid, thereby avoiding the cascading effect.

Care should be taken to smoothen the administrative hassles for filing tax returns and claiming tax refunds. The Budget will also be positive for M&A activitiesThe Finance Minister has also confirmed the continued focus on privatisation efforts. Banking sector reforms will be boosted by the proposed setting up of the Asset Reconstruction Company (ARC) by June. The ARC will enable Indian banks to get rid of the baggage of non-performing assets. The linking of deposit rates with GOI securities yields is also a welcome step.

The creation of the Infrastructure Equity Fund, private sector participation in airports and ports and steps towards addressing the power sector transmission and distribution reforms are positive steps to boost infrastructure development. The increase in the planned expenditure and the additional depreciation of 15 per cent for plant and machinery will also stimulate growth.

(The author is Chairman, J.M. Morgan Stanley Private Ltd.)

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