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Budget 2016: Impact on Real Estate, Construction and Infrastructure sector

By – Harpreet Singh, Partner, Risk Assurance, Price Waterhouse & Co and

Vijay KR, Director, Infrastructure and Real Estate, Price Waterhouse & Co

India has one of the fastest growing economies in the world today. For the first time in the recent years, it is expected that we will pip our fairly large neighbor (read: China) in the y-o-y (infamous) growth statistics (China @ 6.8% vs. India at 7.5%). With half of our 1.25 billion workforce under the age of 25, the future looks bright, however is it all hunky dory, is the question we must ask? With a projected population of 1.45 billion by 2028, we will overtake China as the most populous nation in the world. Now take that statistic and compare it with our sheer geographical spread (India 3.2 million sq. kms vs. China at 9.5 million sq. kms), sheer disproportion in the size of economies and current infrastructure and we are forced to introspect whether we are heading in the right direction, and if not, are we willing to correct course? A failure to recognize the right path, can be quite disastrous given that we have more than 1/7th the population of the globe.

The last two Budgets saw the Government dealing and addressing legacy issues, especially retrospective taxation and a growing mountain of avoidable tax litigation. This year’s Budget has been projected to be in line with the Finance Minister (FM) and the current Government’s “Transform India” focus. The global outlook for India seems encouraging and International Monetary Fund has projected India to be at a ‘bright spot’ and the World Economic Forum has commented that India’s growth rate is ‘extraordinarily high’. The current Government clearly wants to see India break out of the “big-but-poor” contradiction and take its rightful place at the high table with the most developed countries. Initiatives like ‘Skill India’, ‘Digital India’, ‘Startup India Plan’ and its move towards a ‘pensioned society’, besides the ‘Make in India’ and ‘Swachh Bharat’ initiatives are indicators of that intent.he current government has been quite vociferous in their attempts to promote infrastructure development, which by any stretch of imagination, is one of the most important factors towards providing a sustainable backbone to the rapid growth dream. Similarly, the housing gap and absence of affordable housing to shelter this mammoth population has also been on the agenda of the government. This article looks at visiting the “Union Budget” 2016‒17 and to analyze whether the Governments attempts to address these issues, regulatory concerns, and other challenges from the previous budgets that can help facilitate the infrastructure development and growth in the sector, are truly in the right direction.

For reference, the total outlay for infrastructure in the Budget 2016-17 including ‘Internal and Extra Budgetary Resources’ (IEBR) stands at INR 2,46,246 crore approximately 8% of our GDP as compared to an average of approximately 11% y-o-y which China has been spending. With their economy being 3 times our size, their spend is substantially more. However, Rome wasn’t built in a day, and the budgetary allocation seems to be in the right direction given our limited means and mounting fiscal deficit.

So, What’s in Store!!

For the Real Estate sector, Budget 2016 has been a mixed bag, with the FM offering several benefit and growth prospects in addition to some other announcements which may have significant negative impact on the sector. For example, an allocation of funds worth INR 38,500 crore to MNREGA may reduce the availability and increase the cost of labor for construction while the announcement of the proposed a deduction of 100 percent of profit for development of affordable housing may help boost the affordable housing sector significantly. In addition to this, a Budget of INR 20,075 crore is sanctioned under “PradhanMantriAwasYojana” (PMAY) for providing assistance to Rural and Urban ‘Below Poverty Line’ households for construction of houses and upgradation of kutcha houses. Again, the intent seems right, but the general sentiment in developer community continues to rue the populous measures such as the employment guarantee schemes mentioned above. Viable long term initiatives such as an enhanced skill development programs and labour reforms should be further explored by the government to ensure that we have a strong labour force vs. a forcefully employed labour force.

From the taxation perspective, benefits extended to individual tax payers include an additional deduction of INR 50,000 for interest on home loan for houses under INR 50 lakhs and an enhanced time period of 5 years (from existing 3 years) for acquisition/ construction of house property for claiming deduction of interest. Also, the excise duty exemption for “Ready Mix Concrete” (RMC), in addition to Concrete Mix prepared at site for use in construction work will have a significant positive impact on overall construction cost. It will be interesting to see whether this spurs the demand for housing as it is expected.

On the investments front, in order to make “Real Estate Investment Trust” (‘REIT’) a realty and to bring it in parity with the global REIT taxation regime, announcements have been made to make the Business Trust structure, tax efficient. On these lines, it is proposed to exempt “Dividend Distribution Tax” (DDT) on distribution made by a “Special Purpose Vehicle” (‘SPV’) to business trust and its investors. The real estate sector which has been reeling under immense pressure due to lower demand and liquidity has been given some respite by the Government in the form of Service Tax exemption for low cost houses (up to carpet area of 60 sq.m. per house) under specified Housing Schemes; exemption has also been extended in cases of civil structure pertaining to rehabilitation of slum dwellers.

Further, services provided to the Government, a local authority or governmental authority, in the nature of construction, erection, commissioning (subject to satisfaction of specified conditions) shall also be exempted from service tax.

At the same time, the FM reduced the rate of abatement (i.e. the rate of deduction available for arriving at taxable value) applicable on construction of complex, buildings etc. from 75% to 70%, resulting in an increase of taxable value and consequent increase in effective rate of service tax.

Though the Government has received cheers from real estate sector for its move to boost housing demand and supply but more could have been done to revive this sector and settle the existing ambiguity. Ambiguity exists with regard to exemption on transfer of shares of SPV to REIT, as the exemption under section 47 (xvii) may not be provided to sponsors / investors where Business Trust does not have controlling interest in SPV. Clarity is also required on the long-standing issue of characterization of rental income as house property or business income and on taxability of unsold flat in the hands of Real Estate Developers.

The individual tax payers were hoping to see a separate section for claiming deduction for repayment of housing loan or at least increase in the limit of deduction stuck at INR 150,000 clubbed with other investments which has not figured in the finance minister’s scheme of things.

The infrastructure sector has been very expectant of the current Government due to its clear intent of being focused on higher infra spending. Across forums, it has been recognized that India’s growth would spur only with the growth and development of infrastructure in size, scale and speed, and hence the sector has witnessed enhanced scrutiny across the public and private sector. Multiple reforms have been initiated in the infrastructure sector, resulting in robust growth in most key areas.

The Government has announced some key policy measures such as the approval of The National Investment and Infrastructure fund to extend equity support to infrastructure non-bank financial companies. Further, as stated by the FM, for the development of infrastructure, role of private players shall be pivotal, many of which are implemented in the “Public Private Partnership” (PPP) model. In order to incentivize this model, a three point framework has been announced which focuses on

Institutional arrangement for Resolution of Disputes in infrastructure related construction contracts, PPP and public utility contracts,

Guidelines for renegotiation of PPP concession agreements, and

A new credit rating system for infrastructure projects with an emphasis on various in-built credit enhancement structures

The Union Budget has allocated INR 55,000 crore to expedite expansion of roads and highways by approving approximately 10,000 kms of National Highways in 2016-17. In addition to this, approximately 50,000 kms of State Highways will also be taken up for upgradation as National Highways. There is also an intent to streamline and bring on track stalled projects in the sector, and this will facilitate rapid growth of the tourism, transportation and logistics sector.

The FM’s speech while presenting the Union Budget had a special mention of growing capacity of major ports and high quality of cargo. The Sagarmala project was rolled out last year, with further plans to develop new green-field ports both in the eastern and western coasts of the country. Also, developing National Waterways as a mode of transport indicates the Government’s focus on the maritime sector. INR 800 crore has been provided for these initiatives with a permission of mobilization of additional finances through raising of bonds.

The FM also stated the need to diversify the sources of power generation for long term stability in the power sector. He shared Government’s vision of developing a comprehensive plan to execute in the next 2 decades, to augment the investment in nuclear power generation. INR 3,000 crore per annum Budget is allocated in addition to the public sector investments to facilitate the required investment in the sector.

As per the FM, the Government will also permit mobilization of additional finances to the extent of INR 31,300 crore by NHAI, PFC (Power Finance Corporation Ltd.), REC (Rural Electrification Corporation Ltd.), IREDA (Indian Renewable Energy Development Agency Ltd.), NABARD (National Bank for Agriculture and Rural Development) and Inland Water Authority through raising of bonds during 2016-17.

The accelerated depreciation of 20% which was earlier limited to power generating and distribution companies has now been extended to power transmission companies also. To revive the unserved/ underserved airports, the Budget has restored the service tax exemption on construction of airport/ ports, which had earlier been withdrawn.

On the urban infrastructure front, a total of  INR 17,296 crore has been set aside and  for rail, roads and irrigation programs, issue of tax-free infrastructure bonds has been allowed andother than these measures, there seems to be little else which has been done to boost this segment. There was expectation accompanied with a corresponding anticipation that the Government shall provide more tax related concessions, with a view to incentivize greater capital expenditure by lowering costs. So, from a taxation perspective, the current budget has been a mixed bag for the infra sector.  While certain additional incentives/ concessions have been provided, certain others have been withdrawn - some of them much to the surprise of the industry. Budget 2016 was likely to announce scheduled phase out of incentives along with reduction in corporate tax rates and it lived up to its expectation.

To everyone’s surprise, the Government has withdrawn the service tax exemption earlier available for monorail/ metro where the contract has been entered after 1 March 2016. The Government has also withdrawn the customs duty exemption available on import of specified machinery required for construction of roads. Such withdrawals seems to run contrary to the general intent shown by the Government regarding its emphasis on infrastructure of which metro/ roads hold a pivotal role.

Though this budget does not announce any big reforms for the infra sector, it is expected that the implementation of various projects such as “Ujwal DISCOM Assurance Yojana” (UDAY), Smart Cities, investment in development of road and National highways which are in the pipeline would go a long way to push the infrastructure sector.

While the intent of the Budget seems to be positive, it remains to be seen whether as a country we are prepared for the growth. Policy and fiscal measures aside, it is important to understand that our story (for reasons such as our diversity and polity) cannot be compared to the success stories seen elsewhere. The real challenges seem more socio-political and psychological which cannot be rectified by policy. As a country we continue to wait for much awaited reforms such as Goods and Services Tax (GST) and the Real Estate Regulatory framework and as years go by, the country continues to be held back for no apparent reason. For now, the wait continues, with the hope that better sense will prevail.

Sunil Kanoria

President ,Assocham

Huge focus on rural economy with a commitment to double the farmers’ income by 2022, betting quite high on rail and road infrastructure and yet sticking to the financial discipline by retaining the fiscal deficit targets for 2016-17 are the most important takeaways from the Union Budget 2016-17.

Getamber Anand

President - CREDAI National

In this year’s Union Budget, our Finance Minister has taken the right steps to boost housing and ensure that ‘Housing for All by 2022’ becomes reality. CREDAI welcomes the announcement, on the supply front for Private sector’s participation and housing for all by 100% income tax exemption on such houses besides the MAT 30 sq m in metros and 60 sq m in non-metros. This will encourage the private sector to reach these areas that accommodate about 90% of the shortage. 100% exemption will actually increase the IRRs on such ventures. On the enabling side to the home buyers, the increment of a deduction of INR 50,000 on the home loan for a house of INR 50 lakh is a very big attraction. Moreover, there will be a net to net saving of 50,000 rupees a year for such home buyers. Considering there has been a 100% exemption of service tax on such houses as well. The increase of deduction on rent paid on a house from INR 24000 to INR 60,000 will also result in a saving of about INR 12,000 to INR 13,000 a year.


J C Sharma
Vice Chairman and Managing Director, Sobha Limited

In the given economic environment, this Budget is overall balanced and is growth oriented with immense capacity to unlock the initiatives taken by this Government. As far as the housing sector is concerned, it has come out to be the primary beneficiary. While cars, luxury items, jewellery, travelling, dining, tobacco have all become costlier housing sector has gained the much needed attention.

We welcome some of the realty sector specific proposals.

The 100% deduction for profits to an undertaking in housing project for flats up to 30 sq. metres in 4 metros and 60 sq. metres in other cities approved during June 2016 to March 2019 and completed in 3 years will encourage supply in the affordable housing segment. This is subject to Minimum Alternate Tax.

The proposal that distribution made out of income of SPV to the REIT and Infrastructure Investment Trusts (INVITs) having specified shareholding will not be subjected to Dividend Distribution Tax (DDT), in respect of dividend distributed after the specified date, is a progressive step. This step is likely to promote REIT and attract new investments.

Baba Kalyani

Chairman, Bharat Forge

A good budget on expected lines which has managed to keep fiscal deficit at 3.5% of GDP and focus on reviving investment cycle driven by infrastructure and rural development inspite of various domestic and external challenges.

Shashi Kiran Shetty

Founder & Chairman, Allcargo Logistics

“The Indian government’s vision of ‘Transforming India’ was very well articulated in today’s budget speech of Finance Minister. On one hand the measures announced in agriculture, rural and healthcare sectors will increase the confidence of rural India while on the other financial and tax reforms will increase the confidence of investors. Besides, the government’s focus on skill development, job creation, infrastructure development and higher education will help create more job opportunities.

From a common man’s perspective too, the budget has presented some good news. Measures such as increase in HRA and lesser tax burden on individuals with income less than ` 5 lakh will surely be welcomed.

The government’s impetus on increasing the efficiency and modernizing of ports and improving the road infrastructure will definitely provide a fillip to our sector. Overall this is a realistic budget with more focus on rural and infrastructure development while keeping the fiscal deficit in check.”

Sharan Bansal

Director, Skipper Limited

“We welcome the budget as it is positive and puts forth a realistic roadmap which focuses on sustainable economic growth. It included 100% electrification of rural villages by May 2018 and also enhancing expenditure in priority areas of Farm & Rural sector; both of which will offer enhanced growth opportunities in the power & water sectors. The government’s thrust is on providing impetus to the Make in India and other such policies vision by giving clarity on taxes, definitive measures to ease of doing business in India and encouraging domestic and foreign direct investment. The nine pillars identified by the government along with a GDP growth of 7.6% create an impetus which will transform the economy in 2016 – 2017.”

Anuj Puri

Chairman & Country Head, JLL India

Union Budget 2016-17: Below Expectations, But With Some Major Positives

To give him due credit, the Finance Minister has definitely made a concerted attempt to manage expectations with a balanced budget. While three of the real estate sector’s major expectations – increased HRA deduction, removal of DDT from REITs and boost to affordable housing by allowing 100% deduction on profits made by entities constructing them – have been addressed, the Budget offered no financial protection from project delays to home buyers.

Most first-time home buyers in the major metros will be left out of the additional ` 50,000 tax exemption announced today, as it is applicable only on houses worth up to ` 50 lakh with loans of up to ` 35 lakh for houses. This announcement will mostly benefit first-time home buyers in tier-III and tier-II cities. The infrastructure sector was a major beneficiary today.

The biggest announcement with implications for the real estate sector in India was removal of DDT from real estate investment trusts (REITs)

REITs could become a reality soon – The Dividend Distribution Tax (DDT) got exempted, clearing a final hurdle on the way of the successful listing of REITs in India. We expect a few listings to happen in the current year itself, either by financial institutions or developers. Currently, around 229 million sqft of office space can be seen as REIT-compliant. If we assume that even 50% of these get listed, we are looking at a total REITs listing worth USD 18.5 bn.

• Road infrastructure and new land opening up – Approximately 16-18 km of road construction per day has been achieved by the middle of the current financial year, and the Budget has adopted measures to significantly step up NHAI capabilities in this regards. Roads infrastructure has great influence on real estate development, particularly with the new land it opens up for development through highways and feeder routes.

• Infrastructure creation – The Budget has outlined revival plans for non-functional airports in partnership with state governments, with a vision to spend around INR 100-150 crore on each airport to make them functional again. This will a boost to infrastructure in many tier-II and tier-III cities, and is without a doubt positive for their real estate markets. A select few projects that are commercially viable with good ridership could pick up pace in the near term.

• Release of land – Going by today’s Budget announcements, Central PSUs are going to be encouraged to reduce their exposure to excess land holdings. While availability of land for development is definitely a constraint and the Land Acquisition Bill is increasingly difficult to implement, an alternative route is to make use of land holdings of central PSUs. We have seen this been done in the railways budget, as well. 

• Retail sector – The revamp of the Model Shops & Establishment Act is a welcome move and could help the retail sector considerably. Unorganised retail could receive a fillip as smaller shops will now also be given the option of remaining open for all seven days of the week, like organised malls. While this will make the high street retail real estate proposition a bit more attractive, we will have to wait and see the implications from a labour market perspective.

• Office occupancy perspective –  The Budget made a strong case for promoting start-ups in India with 100% tax rebate on profits announced for them for three years. In the recent past, we have seen successful start-ups (particularly in the technology and eCommerce sectors) becoming big and occupying a commendable share in office space. As more start-ups get encouraged to commence operations, we expect developers to offer more small mixed-use properties or arrangements for sharing of office space to cater to this segment.

Abhishek Lodha

Managing Director, Lodha Group

“It is a thoughtful Budget, which has taken into account realities of global and Indian conditions. The focus on rural economy will help rekindle demand in rural India and enable stronger, more sustainable economic growth for the entire country. At the same time, the finance minister’s idea to retain a fiscal deficit target of 3.5% is commendable. It will not only enhance India’s credibility amongst the global investor community but also open doors for the RBI to consider lowering interest rates.

The focus on affordable housing will give much-needed impetus to develop greater number of affordable housing projects across the country, thus, directly aligning the agenda with the prime minister’s vision of ‘Housing for All’. Increasing the limits on interest deduction on homes costing less than ` 50 lakh and removing the Dividend Distribution Tax on REITs, both are welcome measures which will help boost the attractiveness of India’s housing sector.  We welcome the Budget and think that it will pave the way for India to continue being the fastest growing major economy in the world.”

Vipin Sondhi

MD and CEO, JCB India

The union budget 2016 is also well aligned to PM’s vision of ‘Make in India Campaign’ by enlisting nine key pillars to help transform India. Infrastructure sector is a key contributor and the focus to address core growth issues including agriculture, social programs, rural development, education with skill development and job creation, financial reforms, policy reforms in terms of ease of doing business; fiscal discipline and tax reforms would definitely give impetus to the economy.

The one major area addressed by the union budget was to revive the economy through stimulation of demand. 85% of stalled road projects are back on track and the government is upbeat by announcing an investment of total ` 97,000 Crore in the Budget 2016-2017 to road sector. This also includes the all-important Prime Minister GraminSadakYojna (PMGSY).  The budget has an emphasis on physical infrastructure with the allocation for roads, national highways, irrigation put together at ` 2.13 Lac Crores, it will create jobs in rural India in the Construction sector as it is the next biggest employer after Agriculture. Infrastructure projects supported by programs like FasalBimaYogna, KrishiSichaiYogna, others and ensuring skilling of one crore youths over the next three years through 1500 multi skill  training institutes would act as catalyst for bolstering domestic demand. These steps would further look at strengthening Indian economy amidst the current global uncertainties making India as one of the bright spot in the world. An indication towards the roadmap for GST would have been an additional boost for the economy.

The finance minister has addressed the key issue of PPPs in accepting to set up a mechanism for dispute resolution, re-negotiation of PPP projects because projects have a life cycle of 15 to 20 years and finally a credit rating system for infra projects to be developed rather than to be based on perceptions alone. This has been handed over to NitiAyog which will develop a credible plan for divestment. As far as ease of doing business is concerned, public procurement will use technology to make it easier and transparent. This is good news for corporates which makes it easier and simpler. Through make in India, there was a demand for correction of customs duties and this has been taken on board. It will encourage value addition and there must be a graded duty structure for raw materials, semi-finished and finished goods as they all have a demand in the sector. All in all, a progressive budget which looks at consolidation and setting up of a platform for growth.

Anil Sardana

CEO & Managing Director, Tata Power

“Tata Power welcomes the Union budget 2016-2017 and appreciates the Government’s balanced effort to maintain Current Account Deficit under a strict disciplined regime.

The Government has announced its focus on providing “power for all”, by May 1, 2018. The Minister has allocated a fund of ` 8,500 crore under ‘DeenDayalUpadhyaya Gram JyotiYojana’ that will be used to facilitate rural electrification. With focus on rural electrification and the allocation of ` 8,500 crore under ‘DeenDayalUpadhyaya Gram JyotiYojana’ will be a prominent step towards this. We clearly see more role for our sponsored companies like Tata Projects & Tata Power Solar to have enhanced participation. However, to sustain an electrified India, there also needs to be a strong power distribution sector. We hope more discoms will benefit from the Uday scheme to meet this goal.

Already the tariffs in some States, when it comes to supply to commercial and industrial sectors, are on par with wind and solar power generation. However, limiting the accelerated depreciation to 40 per cent may hit the growth of this industry. The Clean Environment Cess (erstwhile Clean Energy Cess) has doubled from ` 200 per tonne to ` 400. This would increase the cost of power generation by 10-12 paisa per unit. This  will also put more stress on tariffs and Regulators, as in most of the states cost of Average Billing is lower than Average Cost of Service.

Also, Finance Minister’s announcement on pursuing Public Private Partnership (PPP) options and debottlenecking PPP matters through ‘Public Utility Dispute Resolution Bill’ and ‘Guidelines for renegotiations of PPP contracts’ would go a long way in resolving matters related to stranded assets. Government already has recommendations of Vijay Kelkar committee with it.

We also want to congratulate the Government on focusing on social and employability issues like its announcement of increasing its allocation to Skill India Mission to ` 1,700 crores. We look forward to working closely with the government towards holistic development of the country. Tata Power is committed to provide 24x7 uninterrupted and reliable power supply and the fuel of the economy!”

Anand Sundaresan

Vice Chairman and Managing Director, SchwingStetter

The huge investment proposed on the infrastructure development like road, airport, railway and power projects will definitely give a fillip to construction equipment manufacturers. The road equipment manufacturers are likely to be benefitted the most because of the huge investments planned in the national highway sector as well as in the up gradation of state highway roads to national highway level.

After a dull period of almost 3 years, the construction equipment manufacturers can look at growth in the coming years. Significant emphasis on irrigation projects and rural road projects under PMGSY scheme will also help the construction equipment industry.  This will create enormous opportunities for smaller capacity construction equipment.  I expect that the current manufacturers will not be able to meet the anticipated demand, which will lead to opening up the opportunity to many new manufacturers. 

Many sops are also given for the building / real estate industry, which should give a boost to the sick real estate industry. The tax reforms and the expressway created for settlement of disputes on various infrastructure projects and PPP projects are most welcome. Overall, the budget is quite good and progressive and will be an elixir to Make in India concept.

Amit Gossain

MD, KONE India

Here are the top developments from union budget which can make a difference to our industry:

1. Removal of dividend distribution tax on REITs: The last significant tax hurdle for the launch of REITs in India has been removed. REITs are listed entities that primarily invest in leased office and retail assets, allowing developers to raise funds by selling completed buildings to investors and listing them as a trust. The REITs have now been kept out of the purview of dividend distribution tax. This move will now encourage the launch of REITs in India, thereby addressing the funding / liquidity concerns of developers. This will result in increased real estate activity in the commercial and office space and a benefit to elevator industry.

2. Affordable housing also got major support in the form of 100% deduction for profits to an undertaking from a housing project (for flats up to 30sq.m. in four metro cities and 60sq.m. in other cities) approved between June 2016 to March 2019, and completed within three years of the approval. Besides this, the additional deduction of ` 50,000 to first time home buyers will also help affordable housing.

3. The housing sector will also derive significant benefit from the boost given to infrastructure segment.

4. The investment of 97,000 crs on roads and increased focus on rail and airport connectivity will pave way for creation of additional townships and increase in real estate activity

5. However, there were expectations of the much-awaited ‘industry’ status to real estate industry which has not been met in this budget. Other measures like setting-up of Real Estate Regulatory Authority, extension of time limit for IT deduction to buyers of delayed residential projects could have given great benefit to real estate industry. But, they have not been considered now. They are good for long term measures.

Kapil Wadhawan


This year’s union budget has been encouraging for the housing finance sector and the overall economy. The proposal to introduce 100% deduction to undertakings for construction of affordable housing will help us in realizing honorable PM’s “Housing for all by 2022” scheme.

The proposal to introduce guidelines for renegotiation of PPP contracts and reform dispute redressal mechanism will encourage private participation in the development of affordable housing projects and road infrastructure.

Decision to exempt REITS from DDT is also a welcome move. This will ensure positive movement on real estate projects and will help in bringing the sector on a sustained growth path.

DHFL had recommended empowering the customer for greater affordability. In this context, the decision to give additional exemption of ` 50,000 for housing loan upto` 35 lakh sanctioned in 2016-17 for 1st time home buyer provided the cost of a house is not above ` 50 lakh is praiseworthy and will definitely ensure that more Indians will fulfill their dream of owning a home of their own.

The decision to improve the ease of doing business in India by deepening corporate bond market and announce initiatives to reinvigorate private sector has come at the right time. This coupled with reduction in corporate tax rates from 30% to 29% from FY18 for companies with turnover less than  ` 5 cr will boost the SME sector and help in economic growth.

DHFL welcomes government’s commitment to boost road infrastructure and address rural distress by skill development of rural population, allocating funds for MGNREGA scheme and providing support to agriculture. We are of the view that this year’s budget will enable the Indian economy to withstand adverse global pressure and move on the road to a more balanced, sustainable and inclusive growth. We will remain an attractive destination for investment over the medium and long term.

We also look at this Budget as one which has been quite responsible on the deficit and borrowings. Coupled with fall in crude prices which is a major input cost in our system, we can safely bet on inflation remaining benign. We see a very positive move on interest rate front as well as on bond market that will give a great fillip to financial services sector.

Y M Deosthalee

CMD, L&T Finance Holdings

One of the key areas is the Transportation infrastructure, where total allocation is ` 97,000 crore (including projects awarded by NHAI and under the PradhanMantriGraminSadakYojana). This, combined with the ` 1.21 lakh capital expenditure target set by the Railways, should help kick-start economic activity in the short-term. In the long term, this investment will help the country reduce its infrastructure deficit, due to which the country’s manufacturing competitiveness continues to suffer, while also providing rural connectivity.

Dimitrov Krishnan

Vice President and Head of Volvo CE India

“Broadly speaking, the budget plans are progressive and in-line with what we were expecting at Volvo CE. There remains a strong emphasis on the road building sector which is very encouraging to see, both for us and for our customers. In addition, there is a focus on developing rural infrastructure and this is also good news for the construction industry. The commitment to provide power, water and homes to these areas should be a strong source of activity for our industry, as well as contributing to the overall development of India.”

“Looking at the budget we can also see the influence of ongoing global uncertainty in the economic markets. It seems that the government understands that while the economies of many other countries remain depressed, growth for India will have to be driven domestically. The only real downside in the budget was that there is still no clarity on the issue of GST. And while this remains a question mark there will still be a lot of uncertainty for businesses, both small and large.”

Rana Kapoor

MD & CEO, YES Bank

“FY17 Budget has provided a strong growth direction to the Indian economy. The Finance Minister has managed to balance the need to prioritize social sector requirements with economic and business imperatives. The segmented 9-Pillar Approach with well carved out deliverables will ensure execution clarity and focus. By adhering to fiscal deficit aim of 3.5% the Budget creates room for complimentary monetary policy rate cut of 50 bps in the near term and 75-100 bps in 2016, conditioned on favorably evolving macros. Key measure to increase the allocation to infrastructure with an impressive outlay of INR 2.2 lakh crore will help to re-energize the growth multiplier, while the specific measures to improve ease of doing business and favorable tax treatment for start-ups and MSMEs will go a long way in boosting job creation”.

Sanjay Kirloskar

CMD, Kirloskar Brothers Ltd.

With adequate focus on farming, social sector, infrastructure and fiscal prudence, the Union Budget 2016-17 is broad-based. The target to double farmer’s incomes by 2022 is ambitious and higher allocation for irrigation schemes and crop insurance will positively impact the sector going ahead.

Increased thrust on government investments in infrastructure will aid economic growth now that private sector investments are subdued.

Substantial enhancement in allocation to Gram Panchayats and municipalities will empower them and help accelerate development.

Suresh KV

Country Head of ZF in India and Head of ZF India Pvt. Ltd

“The much awaited budget presented by Finance Minister, MrArunJaitley shows immense promise.

A net investment of ` 97, 000 crore in the road sector has been proposed and a total of nearly 10, 000 kms of national highway has been approved by the government. With this proposed advancement in the infrastructure, the country shows that it is now ready for the advent of smart transport options. These initiatives are truly the right ones for stimulating the off- highway products where ZF is present and will be glad to contribute.

Also, the dedicated R&D team of ZF will continue their endeavor to find suitable innovative and futuristic technologies that can be introduced in India.

Additionally, the setting up of 1500 multi skill training institutes would help auto components manufacturers in acquiring skilled talent. The Finance Ministry has also promised to enforce the necessary revisions in Motor Vehicle Act and open up the road transport sector in the passenger cars segment.

All in all, we at ZF are looking forward to this financial year as this budget gives us the motivation to continue on our path of futuristic and sustainable growth.”

R. Shankar Raman

Chief Financial Officer & Member of the Board, Larsen & Toubro

“The budget has emphasized on the growth of some key sectors which required the much-needed attention, such as transportation and infrastructure. If you take the railways spend and road capex together during FY16 we looked at an outlay of 1,80,000 crores and that has moved to 2,20,000 crores which is a good 20 percent increase over the previous year, indicating a strong signal towards the development of this sector. I am also delighted that the government now recognizes the emerging need for PPP, which requires explicit expertise and resources to complete key projects. On the taxation front nothing has been altered significantly, as we expected the tax rates to come down from 30% to 25% as promised. On a broader note, business growth on the whole and job creation are going to be important if the government is going to look at an increase of ` 1,00,000crores in taxation and that is something which we might know as we move along.”


Executive Chairman, Finolex Industries Ltd

“As per the market anticipations this year’s budget focus is more on agriculture and job creation with a carefully drafted focus on revival of rural demand with increased agriculture productivity and farmer’s welfare. Rural spending is definitely going to be a game changer as far as agriculture sector is concerned”.

Nasir Mulani

Managing Director Citec India

“The government has announced a budget that is balanced and constructive.

Considering the energy sector, the budget talks about a massive expansion programme for renewable and nuclear energy which is much appreciated. The focus on ‘Power for all” is a natural but vital step that has been taken.

But as far as Thermal Power capacity is considered, there’s still a need for a clear road map to restore the long suffering market. We are positive that the government hasn’t ignored the incomplete projects pending under regulatory issues and the hurdles will soon be addressed. One key step could also be to refurbish the stalled thermal plants with new technologies.

Oil and Gas being a strategically important area contributing to the nation’s overall economic growth, stronger investments are expected within exploration and production in India. The count of natural gas in India’s total energy mix is far behind the global average. To encourage the same, the government announced policies favouring the economics of new gas discoveries, thus restoring investor confidence to a good extent.  We anticipate a lot of action and opportunities coming up in the energy sector.

Talking about at the manufacturing sector, rationalization of indirect tax and duty structures has been a good initiative strengthening the ‘Make in India’ move.”

Rohan Suryavanshi

Head – Strategy and Planning – DilipBuildcon Ltd.

This budget has huge positive ramifications for us & our industry.

Infrastructure is the 5th pillar in the FM’s endeavor to build a stronger and a more resurgent economy. He has announced an allocation of
` 2.19 lakh crores in rail and road infrastructure. Out of this, ` 97,000 crores will be spent on roads. He has also announced ` 20,000 crores for irrigation projects with a planned expenditure of ` 87,000 crores over the next 5 years in this sector.  These allocations will, to a great extent, help the government achieve a big chunk of  its targets &kickstart the economy.

 The allocations in road and highway sector translate to a significant increase of 22% from last year’s budget. However, the government is also looking at the private sector to play an important role in meeting the aggressive target of completion of 10,000 kms set for the National Highways construction in FY 2016-17. The PPP model, which involves both private and public sectors, joining hands, symbiotically, is the route forward to achieving success. The government has taken a multi-pronged approach to improve the PPP model for all stakeholders. They have systematically identified the hurdles of these projects & tried to address them. The announcements on Public Utility bill, guidelines for renegotiation of PPP concession agreements and new credit rating system for infrastructure projects are some of the ways the government has gone about strengthening PPP contracts & kick starting stuck projects.

I believe the government is committed to improving connectivity across the country. This improvement will further provide invaluable support to the various initiatives like Make in India, Smart Cities, Swacch Bharat Abhiyan among others.

Vineet Mittal

Vice Chairman Welspun Renewables

“The Union Budget 2016 presents an all round holistic development agenda that Prime Minister NarendraModi’s government has been emphasizing on.  There are various initiatives proposed under the Prime Minister’s ambitious national campaigns of Skill India, Startup India, Digital India, Make in India, Stand up India and Swachh Bharat Abhiyan that are expected to transform the country over the longer term.  This budget is clearly focusing on providing relief and benefits to the 70% of India’s population that is living in the rural territories with a focus on uplifting farmers by providing subsidies, skill development for the youth, women empowerment ,education, healthcare facilities, boosting local entrepreneurship and a focus on infrastructure. 

To start with INR 35984 croreoutlay has been given to the agriculture sector and 89 stalled irrigation projects have been fast tracked. Multiple schemes like 100% village electrification by 2018, 38500 crores for MANREGA is (the highest ever),  LPG subsidy for rural women – all these initiatives were much-needed.  Given the adverse climatic conditions that have been plaguing the farmers, the budget will be a much needed shot in the arm. If we were to look at this from a long term perspective – developing rural regions will ultimately benefit companies – as this will open up new markets for them. The 300 urban clusters that are planned to be developed will incubate growth centres in rural areas by providing infrastructure amenities and market access for the farmers. They will also expand employment opportunities for the youth. In turbulent global economic scenario, India needs to focus on rural development – which it clearly has.

Strong emphasis has been laid on education and skill building this year. SarvaShikshaAbhiyan has received an increased allocation, while setting up of a Higher Education Financing Agency will certainly help the government in achieving its skill building program- an initial capital base of 1000 crore has been allocated for this. The overall youth to be trained under the National Skill Development Mission overall will be 76 lakhs. Seeding the entrepreneurial spirit of the country, amendments in Companies Act for improving enabling environment for start-ups have been made. They will enjoy tax holidays for 3 years. A separate provision under this for SC/ST/women entrepreneurs has also been provided under Standup India scheme. Also there is a proposal to increase the target next year to 1,80,000crore for PradhanMantri Mudra Yojana (PMMY) which was launched for the benefit of bottom of the pyramid entrepreneurs to borrow from Banks – NBFC – MFIs. 

Samir Gandhi

Director, Gandhi Automations Pvt. Ltd.

“With a great emphasis on growth of economy in the Union Budget, the Finance Minister has made a commendable effort towards creating a robust path for the future. I am happy that the budget has walked the talk for Make in India. The skill development push is another positive as the market demanded and industries have been desperately searching for.”

The predicted 8-10% growth rate of the Indian economy signals a great run for the country in time to come with its own set of challenges. While factors like inflation, oil prices, and rupee valuations will continue to have a major play in the way India maneuvers itself in these difficult global times, we request the government to provide the requisite impetus to infrastructure and position India as great investment hub. We urge the government to adopt a pragmatic approach to strengthen the Indian economy and take India to glorious heights of progress.

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