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The India Union Budget 2015 indicates positive signs for overseas investors

The Australia India Business Council (AIBC) Ltd. in partnership with Ernst and Young presented the ‘India Union 2015 Budget Update’ at the latter’s offices in Sydney on March 9. Samir Kanabar, Partner, E&Y India was in major Australian metros to present the highlights of the 2015 budget to AIBC members.

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Commencing the event, Dipen Rughani, National Chairman, AIBC, welcomed attendees, and stated that it was the objective of AIBC to update the business community here on the new probusiness and pro-reform Indian budget. Sanjay Sudhir, Consul General of India in Sydney who attended the event stated that, “In simple terms, the budget is both benefitting the common man or masses in India, as well as business growth.”

Mr Kanabar highlighted salient features of the Indian budget such as FDI liberalisation, ‘Make in India’, Clean India, Smart Cities, Digital India, and elaborated on the proposed non-adversarial tax regime, alternate investment fund, changes to GST regime, among other matters.

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Paul Bloxham, Chief Economist, HSBC outlined opportunities in the mining projects.

In the panel discussion that followed the main presentation, the push on infrastructure was also discussed. Well-developed infrastructure is a fundamental of any effort to push the economy into the growth orbit. This requirement has assumed a critical dimension for the BJP government’s larger political agenda.

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Prime Minister Narendra Modi’s ‘Make in India’ pitch has ignited a wave of optimism. The proposed Public Contracts (Resolution of Disputes) Bill and the Regulatory Reform Bill will, it is to be hoped, help get stalled projects back on track. The plan for a bankruptcy code must be read in tandem with these two proposals. All these should provide a higher Pro-growth and pro-common man The India Union Budget 2015 indicates positive signs for overseas investors level of comfort to lenders for infrastructure projects. India has shown strong GDP growth since Indian Prime Minister Modi came into power in May 2014. At an AIBC business leaders address in Australia in November 2014, he stated his enthusiasm to drive further growth through regulatory changes.

Arun Jaitley, Finance Minister announced a budget aimed at high growth, saying the pace of the pace of cutting the fiscal deficit would slow as he seeks to boost investment and ensure that ordinary people benefit. The 2015 Budget has also raised hopes for all global investors, and was keenly awaited by investors overseas looking to do business with India.

Key highlights for the fiscal year beginning on April 1

1. TAXATION
* To abolish wealth tax and replacing it with additional 2 percent surcharge on super rich. Expects to implement goods and services tax by April 2016, and to reduce custom duty on 22 items.

2. FISCAL DEFICIT
* Fiscal deficit seen at 3.9 percent of GDP in 2015/16, keep fiscal discipline in mind despite need for higher investment.

3. GROWTH
* GDP growth seen at between 8 percent and 8.5 percent y/y and aim for double digit growth.

4. INFLATION
* Expects consumer inflation to remain close to 5 percent by March, opening room for more monetary policy easing.

5. REVENUES
* Revenue deficit seen at 2.8 percent of GDP and non tax revenue seen at 2.21 trillion rupees with agricultural incomes are under stress.

6. DISINVESTMENT
* Government targets 410 billion rupees from stake sales in companies and total stake sale in 2015/16 seen at 695 billion rupees.

7. MARKET REFORMS
* Propose to merge commodities regulator with SEBI and to introduce a public contract resolution of disputes bill.

8. POLICY REFORMS
* To enact a comprehensive new law on black money and propose to create a universal social security system for all Indians * To launch a national skills mission soon to enhance employability of rural youth * To raise visa-on-arrival facility to 150 countries from 43 * Allocates 346.99 billion rupees for rural employment guarantee scheme.

9. BORROWING
* Gross market borrowing seen at 6 trillion rupees and a net market borrowing seen at 4.56 trillion rupees.

10. GENERAL ANTIAVOIDANCE RULES (GAAR)
* Government defers rollout of anti-tax avoidance rules GAAR by two years and GAAR to apply prospectively from April 1, 2017 * Retrospective tax provisions will be avoided.

11. INFRASTRUCTURE
* Investment in infrastructure will go up by 700 billion rupees in 2015/16 over last year.

12. INVESTMENT
* Propose to do away with different types of foreign investment caps and replace them with composite caps and to allow foreign investment in alternative investment funds.Naturally, whether these initiatives take off depends on how potential investors respond; however overall, the response to the 2015 budget presentation is being seen as a positive sign by financial commentators both internationally and locally.

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