SANJAY NAYAR,
CEO, citibank india
The Union Budget is not glamorous but practical. The finance minister has used the favourable underlying macro economic variables to significantly increase the thrust on fiscal consolidation through both revenue and expense side measures. Rationalisation of subsidies on fertilisers, increasing the service tax, lowering the small savings rates and significantly stepping up expenditure on infrastructure investment: housing and new projects are the highlights. The other theme, which envisages a more efficient tax administration, is welcome. However, all of these need to be implemented efficiently and quickly for the benefits to show. Encouraging foreign direct investment in banks and telecommunications should translate into enhancements in technology, productivity and customer value.
Policy direction lacking
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AJAY MAHAJAN,
MD & country treasurer, BoA
The finance minister has clearly chosen to follow the well-trodden part of his predecessor. There seems to be little policy direction in his statement with many sops catering to various special sectors. Expenditure on subsidies and defence is sharply up. The recommendations of the Kelkar committee have been largely rejected with just some administrative issues being accepted. Importantly, there has been no attempt towards fiscal consolidation, and this could be just another step towards a disastrously high public debt. For bond markets, the reduction in administered rates is clearly positive. By reducing small savings and administered interest rates by 100 basis points, when the markets broadly expected a 50 basis points reduction, the government has positively surprised the markets and moved further in aligning these rates with other market-determined rates.
M&A surge likely in banking
AJAY SONDHI,
Vc & MD, Kotak Mahindra Capital
A number of proposals in the Union Budget will have a positive impact on the financial and capital markets. The 100 basis points reduction in small savings and public provident fund rates is higher-than-anticipated and will impact equity markets positively. Removal of dividend tax is a much-awaited positive for the investor and will provide a boost to equity investments. Elimination of long-term capital gains for equity investments made after February 1, 2003, will encourage fresh inflows and could also result in some churn in holdings over the next few months. The focus on pension funds should over time lead to further institutionalisation of flows in debt and equity markets. The relaxation of foreign direct investment cap to 74 per cent and removal of 10 per cent voting cap for private banks will result in fresh foreign investments as well as enhanced mergers and acquisitions (M&As) in the banking sector.
A mixed bag for insurers
SHIVAJI DAM,
Managing director, OM Kotak
From the perspective of private sector life insurers, the Budget has been a mixed bag. The good news is that the finance minister has attempted to put in a few extra rupees in the hands of the middle class by way of tax rationalisation. Hopefully, this will increase the savings through life insurance route.
On the investment side also, we hope that the infrastructure commitments and announcements will result in a flow of very long term investment opportunities that we have been seeking-though the possibility of that happening any time soon seems remote.
Pragmatic proposals
VP CHATURVEDI,
CEO, Tata TD Waterhouse AMC
The Union Budget is a key policy event in the life cycle of the economy and seeks to create and implement a framework for economic growth while optimising the existing resource conditions. This Budget has been presented with a backdrop of moderate interest rates, global turbulence, high forex reserves, slowdown in growth and slowdown in overall gross domestic product growth. The effort has, therefore, been to focus on long-term development and growth. Overall, it is a pragmatic budget which aspires to meet the growth expectations from the economy while taking care of micro level individual concerns.
Toeing reforms, growth path
SHITIN DESAI,
Vc & MD, DSP Merrill Lynch
The budget 2003 has delivered on the reform and growth mantra anticipated by the markets. There is a two-point approach followed