Budget 2018: Hope Arun Jaitley fulfils promise to reduce corporate tax rate to 25%, says Harsh Goenka

There is widespread expectation that Budget 2018 will focus on infrastructure and agriculture sectors. The street is also abuzz with talks of LTCG tax and if PM Narendra Modi’s Aap hans kyon nahi rahe question to Indian CEO’s at Davos is any indication, there may be unexpected surprises for the corporate sector.   If I were to look at the India story through a macro lens, the recent ratings upgrade by Moody’s and the GDP growth rate forecast at 7.4 percent in FY2019 by IMF is a shot in the arm for the government but the risk of breaching the fiscal deficit with an additional market borrowing of Rs 50,000 crore for the current financial year does raise some concern. GST collections have been somewhat disappointing and according to PIB reports the total collection under GST for the month of December 2017 has been Rs 80,808 crores, lowest since its implementation. However, Q4-2018 could well show an uptick with improved GST compliance and the government’s continuous dialogue with industry bodies to rejig the GST slabs of more than 200 items where there were sharp cuts that cascaded in revenue loss for the government. And, of late, rising crude oil prices cast a shadow on the country’s import bill and margins of companies. That said, the question that one needs to ponder on is what has and what will keep fueling the India growth story? With a burgeoning middle-class, rising aspirations and a huge rural population with increasing disposable income, India’s consumption story remains positive. The PM has also made a very strong pitch for Make in India and the structural changes that his government has undertaken – GST, DBT, Bank Recapitalization, Digitization, are meant to create the superstructure that will serve as the base of the India growth story. Historically, governments have relied on higher government expenditure or public spending in other words, to bolster economic growth. Although this runs the risk of pushing up inflation and interest rates, given stable inflation and excess liquidity in the India’s banking sector, it is not something I would worry about. [caption id=“attachment_4320751” align=“alignleft” width=“380”]  Harsh Goenka, Chairman, RPG Enterprises. Pic Courtesy: RPG Group[/caption] There is a pressing need to create jobs, absence of which could prove to be the Achilles heel for the government in the coming elections. And nothing creates more jobs than the infrastructure sector especially for the informal economy. The ripple effect of modern infrastructure viz., roads, ports, railways, airports, housing, water, etc., augments efficiency and margins across the value chain of manufacturing and services. The Smart City initiative is a step in the right direction. Not only will it create jobs, create opportunities for large-scale capital investment but also improve quality of life and hopefully over the longer term decongest our metros. The other area of focus should be agriculture. With approximately 49 percent of India’s workforce employed in agriculture, the big question is what can be done to double or triple incomes of farmers? Notwithstanding the fact that the government will have to keep spending on major irrigation projects, I suspect if that will have the desired impact on income of the farmers. How can farm yield be increased? How can the marginal farmer get the best price for his produce? Subsidies and loan waivers by various State governments over the years have not nipped the issue in the bud – unless the farmer earns well throughout the year, how will he repay the debt for buying equipment or seed? This vicious cycle unfortunately has not been addressed even to this day. Can the government launch an initiative like ‘Produce-in-India’ that will bring in technology into farming? On an allied note, some efforts could be funneled towards fortified foods which will help tackle India’s pressing malnutrition problems. To run this vast and diverse country is no mean feat. It requires the intellectual prowess of Chanakya, the blessings of Goddess Lakshmi and the good luck that Lord Ganesha brings. I hope the government is able to push through the disinvestment agenda and garner the much needed capital for public investment but I would not dampen the market euphoria and enthusiasm by introducing the LTCG tax at this juncture. As India Inc waits with bated breath for news on corporate tax, we hope Jaitley will fulfill his promise to reduce the corporate tax rate to 25 percent. While this may sound more difficult than Phillippe Petit’s high-wire walk, one still hopes the Budget brings a smile to all our faces. Click here for full coverage of Union Budget 2018 (The author is Chairman, RPG Enterprises. He tweets @hvgoenka)