Rajeev Dubey, managing editor, Business Today
The Sensex swung between over 300 points up and over 200 points down from the previous day's close on Budget Day, 2015, as economists, investors, analysts and corporates struggled to decipher Finance Minister Arun Jaitley's speech.
By the time they did, the Sensex finally ended 141 points up at 29,361.50, which really explains the general reaction to the Budget - positive.
But expect an FII-led push on Monday when trading resumes. The FII and FDI reactions to the Budget remained unaccounted for since Sebi allowed special trading for the Budget on a Saturday when most FIIs are closed for business.
There are a few positive takeaways for FIIs, too. For one, a long-pending demand that foreign investment limit caps must be category neutral between FII and FDI, has been accepted. Two, the dreaded General Anti-Avoidance Rules (GAAR) has been deferred by the Finance Minister by two years. GAAR allows tax authorities to disallow any transactions that the tax authorities consider attempts at avoiding tax - for instance, foreign investment that is routed through tax havens.
But what's in it for the corporate world? A lot. For one, corporate tax rate of 30 per cent is being reduced to 25 per cent over the next four years.
But at the same time, the government also plans to take away all exemptions. It's still to be seen where that will leave the net effective corporate tax rate, which stands at nearly 23 per cent today.
Among the positives for corporate India: Long lambasted for policy flip-flops, the government appears to be bringing predictability and some level of simplicity and transparency in its thinking and proposals.
Take the case of reduction in corporate tax rate. It allows companies to plan because while the tax rate will be reduced, a whole host of exemptions being allowed currently will also be taken away. "I didn't do it this year because I didn't want to take the industry by surprise," says Jaitley on his decision to implement it over four years, starting next year.
Next, the FM announced that the government has accepted more than 11 recommendations of the Parthasarathi Shome Expert Committee set up to improve the ease of doing business and bring transparency in arriving at Indian assets in transactions by foreign entities. These will be implemented by executive orders or by changes in the Acts.
The government's commitment to implementing GST by April 1 2016 - and not defer it yet again - would also be received as a major positive by the corporate world.
Though the real impact of the increase in service tax rate from 12.36 per cent to 14 per cent is still sinking in, clearly it's going to have a major impact on the entire services industry, including retail and phone bills, or the DTH and water and electricity bills.
The measure, though inflationary, is meant to bring service tax in line with the GST tax rate (demanded to be nearly 17 per cent) when it gets implemented in fiscal 2016/17.
The industry's and the government's major worry remains on the new capital expenditure front. Despite the positive sentiment all across the corporate sector, investment in new projects has come to a grinding halt since 2008.
In line with the government's aim to kick-start growth, the corporate sector would be relieved that the government has opted not to withdraw the additional depreciation of 20 per cent allowed (over and above the normal rate of depreciation) to incentivise fresh investment in plant and machinery. In fact, for investment in the new states of Andhra Pradesh and Telangana, the additional depreciation has been raised to 35 per cent.
And infrastructure (at least Rs 70,000 crore) and education (Rs 68,968 crore) are the other major areas where government investment will benefit the corporate sector since many of them will be bidding for government projects. In infrastructure, in particular, the government is moving away from PPP projects to government-funded projects to hasten the progress of road and other infrastructure projects.
The Rs 2,46,727-crore (a Rs 24,000-crore increase since last year) in defence expenditure is also good news for the corporate sector since the government has a state policy on manufacturing defence equipment within the country under the 'Make in India' initiative.
Clearly, the corporate sector would have expected much, much more, especially since they knew the government is desperate to kick-start growth in the economy. But, given the fiscal constraints the government will have to work under, they have very little to complain.