Skip to main content

Budget Analysis by ELP

Leading Mumbai-headquartered law firm Economic Laws Practice (ELP) has created a detailed analysis of the annual union budget presented by the Finance Minister Nirmala Sitharaman on February 1, examining the provisions in detail, highlight the nuances and de-mystify the small print.

Extracts from the Preface by Suhail Nathani, Managing Partner, ELP:

This was the third Union Budget within the last twelve months (technically the first was a ‘vote on account’ as India was headed into a general election and hence there was less flexibility available to the Government of the day). Leaving aside these technicalities, in a period of slow growth (GDP growth rate for 2019-20 estimated at 5% against 6.8% in FY19), sluggish investment, sharp deceleration in consumer demand and declining tax revenues, did the third budget do enough to galvanize the economy?

First, unstated in so many words, this is a budget for India’s defence and security – with INR 3,370,000 million allotted to defence procurement and INR 1,050,000 million to the home ministry. 

Beyond this, almost every cause finds a mention and some money allocated to it – agriculture, roads, environment, airport infrastructure are now recurring themes. The government has stated that it seeks to double farmer income by 2022 and expects the number of aircrafts in India to double from 600 to 1200 which will require several more airports. In many ways, the above goals seem on-brand for an economy of contradictions like India.

With an objective of putting more money in the hands of the taxpayer, income-tax for individuals has been reduced and rationalized. At the lowest level, income tax is 15%, assuming the assessee does not claim any deductions. This is most welcome, to the extent that it will reduce complexity. However, it remains to be seen whether it effectively translates into more disposable income and a commensurate increase in consumption and spending. Abolishing dividend distribution tax was also a welcome step.

On the other hand, the budget has not done much to address concerns of the depressed automobile, real estate and manufacturing sectors – sectors which are crucial to boosting employment concerns.

The budget also featured a recognition of wealth creators, who have the ‘respect’ of the Government and assurances to reduce the aggression of the tax collector. Truth be told, this is a long-standing assurance that has often faced roadblocks in the form of various pending litigations. This time, the assurance comes coupled with a direct tax litigation settlement scheme, where, if the dispute is settled by March 2020, the interest and penalty will be waived. Steps are also underway to de-criminalize offences under the Companies Act 2013.

Customs duty on several items have increased to enable Indian domestic manufacturers to compete – very much in line with the tariff route that has gained in popularity the world over. Ironically, however, the move may prove to be counter-productive to the domestic industry for downstream products.

With the Corona virus rampaging in China and estimates of a consequent impact on Chinese GDP, is this budget bold enough to position India to fill the global void? On the face of it, perhaps not – but the extra money in the hands of the aspiring consumer could revive consumption and drive local industrial activity. Moreover, has the government made in-roads in responding to corporate India’s woes, given its own set of fiscal limitations? The answer can, perhaps, be a cautious yes.

Click Here to download the full analysis.

Popular posts from this blog

PE-VC investments in Q2'23 decline 33% to $9.9 Billion

Private Equity-Venture Capital (PE-VC) investments in India during the quarter ended June 2023 (Q2'23), at $9.85 Billion across 182 deals, registered a 33% decrease compared to the same period in 2022 (which saw $14.6 Billion being invested across 371 deals). The investment amount however rose 74% compared to the immediate previous quarter (which saw $5.7 Billion being invested across 181 deals), shows data from  Venture Intelligence , a research service focused on private company financials, transactions, and their valuations. The PE-VC investment figures for the first 6 months of 2023 - at $15.5 Billion (across 363 deals) - was 50% lower compared to the same period in 2022 (which saw $31 Billion being invested across 800 deals). Q2’23 witnessed 19 mega deals ($100 M+

Chiratae, Speciale and Stride Ventures win APEX'24 Venture Capital Awards

Chiratae Ventures, Speciale Invest and Stride Ventures were awarded as among the leading Venture Capital investors in India for 2023 as part of Venture Intelligence APEX‘24 Private Equity & Venture Capital awards event in Mumbai.  The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms and "crowd sourced" voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Return Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies) VC Investor of the Year Chiratae Ventures received the Venture Capital Investor of the Year 2023 Award on the back of 10 part exits totaling $178 million via Secondary Sales during the year. Its exits included those from retail unicorn Lenskart, SaaS Startup Pixis and baby pr

Blackstone, MO Alts and InvAscent win APEX'24 Private Equity Awards

Press Release Blackstone, MO Alternates (formerly Motilal Oswal PE) and InvAscent were awarded as among the leading Private Equity and Growth Capital investors in India for 2023 as part of Venture Intelligence APEX‘24 Private Equity & Venture Capital awards event in Mumbai.  The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms and "crowd sourced" voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Return Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies) PE Investor of the Year Blackstone received the Private Equity Investor of the Year 2023 Award on the back of strong complete exits during the year: from Sona Comstar and IBS Software. Ganesh Mani and Amit Dalmia, Senior Managing D

Avendus tops League Table for Transaction Advisors to PE deals in Q1'23

Aeka Advisors and Ambit claim the No.2 & 3 slot Avendus topped the Venture Intelligence League Table for Transaction Advisor to Private Equity Transactions for Q1 2023 advising 5 deals worth $808 million. Aeka Advisors stood second having advised 3 deals worth $228 million. Ambit followed with 4 deals worth $160 million. Ernst & Young ($114 million across 4 deals) and o3 Capital ($80 million across 2 deals) completed the top five for Q1 2023. Avendus acted as advisor to ADIA’s $500 million investment in omnichannel eyewear retailer Lenskart . Aeka Advisors acted as advisor to Kreditbee’s $160 million fundraise from Advent International, Mitsubishi UFJ Financial Group (MUFG) and existing investors. Ambit advised the $104 million fundraise of Freshtohome from Mount Judi Ventures, Iron Pillar, Amazon and others. The  Venture Intelligence League Tables , the first such initiative exclusively tracking transactions involving India-based companies, are based on the value of PE

PE-VC investments fall 38% in 2023 to below $30 B

The value of investments by Private Equity - Venture Capital (PE-VC) firms in India fell by 38% to less than $30 Billion in 2023. PE-VC firms invested $29.7 Billion (across 756 deals) in Indian companies in 2023, compared to $47.6 Billion (across 1,362 deals) in the previous year, reports Venture Intelligenc e, a research service focused on private company financials, transactions, and their valuations. (Note: These figures exclude PE investments in Real Estate).                                                                                                                                                                      2023 witnessed 67 mega deals ($100 M+ rounds) worth $21.2 Billion, compared to 112 such investments worth $31.8 Billion in 2022. The $2.4 Billion investment in Manipal Hospitals by Temasek (which gained majority control) and TPG Capital was the largest PE-VC investment in 2023. This was followed by the $1.35 Billion buyout of education loans focused HDFC Credila