Relief for realty, auto likely in interim Budget
The Financial Express, February 16, 2009, Page 1
fe Bureau
The government is hoping that the leading indicators of a partial hike in industrial production and a good rabi harvest will combine with the third stimulus package, to be released on Monday, and push the growth momentum of the economy.
The stimulus package, to be announced in the interim Budget, is again in line with a plan agreed by governments across the globe to go in for coordinated fiscal and monetary steps after the downturn peaked in September 2008. The government has been in touch with multilateral institutions such as the IMF and the World Bank on the broad contours of the package. Finance minister Pranab Mukherjee is expected to make a detailed review of the economy in his Budget speech to clarify the steps the government plans to take till May 2009, when the new government is sworn in. The government will target realty and the automobile sector, as they have massive linkages with the rest of the economy.
Anticipating the changes, the stocks of leading banks on Friday ended higher on the Bombay Stock Exchange. ICICI Bank ended 3.2% higher, while SBI too ended 3.1% higher—its highest close in a month.
The third largest, HDFC Bank, also ended 1.1% higher. The barometer Sensex added 168.91 points or 1.78% to close the day at 9,634.74 points.
The realty sector is banking on a relaxation of Section 80 IB(10)of the Income Tax Act. The section gives tax breaks for housing projects with flat sizes of less than 1,500 sq feet but is restricted to projects began before March 31, 2007. The builders felt that projects meant for low-income groups can take off if this date is extended.
The step could also be quite popular but as this involves a change in the direct tax laws, it would need an approval from Parliament unlike most changes in indirect tax laws.
Consequently, the relaxation for pushing up the slab for tax deduction from income for interest payment on housing loans, currently set at Rs 1.5 lakh, is unlikely to happen.
Realtors have also asked banks to ease the terms for giving them loans. Domestic funds are still more expensive compared with foreign funds. In the last stimulus package, realty sector was allowed to go for ECB for integrated townships only. The current demand is to allow it for all other segments of the sector.
Beside realty, the steel industry, hit by a slump in demand, wants the government to come out with schemes for the infrastructure sector in its interim Budget that would lead to higher consumption of the commodity.
“Real boost should be given to the infrastructure sector, which would in turn spur demand for steel in the economy,” SAIL chairman Sushil Kumar Roongta said.
“Interest rates to the borrower must come down to single digit. If that happens, things will become easier (in the economy) and steel demand would surge,” JSW Steel MD Sajjan Jindal said.
Besides, seeking sops for the infrastructure sector, the steel industry wants the government to increase the import duty on the commodity up to 15% as recommended by the steel ministry to protect producers against cheap dumping. “The government should impose 15% import duty soon on steel to protect the domestic industry,” Jindal said.
Commenting on the situation, home minister P Chidambaram on Friday said, “The 2009-10 will be a difficult one for our economy but there will be a turnaround from October or little thereafter.”
Asserting that India would post a 7% growth, he said a “right mix of policies and leadership” was required to steer the country through these difficult times.
Tax collections, another key element of the economy, in the next fiscal may be proposed to grow at moderate 15% in the interim Budget.
According to indications, the interim Budget would propose lower growth in tax receipts of the Centre due to the slowdown.
During the last few years, the Centre’s tax receipts have been growing by 25%.
The tax collections by the government for 2008-09 were proposed to grow by 25% at Rs 6,87,715 crore as per provisional estimates in the Budget. In 2007-08, the tax kitty grew by about 25% at Rs 5,85,410 crore as per the revised estimates.
However, for the current fiscal, direct tax collections posted a negative growth in November and December, before rising again in January. Collections from excise and customs duties are already in negative territory since October 2008.
In fact, collections from otherwise buoyant sector, services, dipped by 3.6% for the first time in December in the current financial year. In the direct tax collections, there is a gap of more than Rs 1,00,000 crore till January this fiscal. And this gap is against the provisional estimates of
Budget for direct tax collections at Rs 3,65,000 crore, whereas the Central Board of Direct Taxes had increased that target to Rs 3,95,000 crore after the first two months showed a remarkable increase.
The interim Budget is also likely to announce short-term measures for exporters reeling under the impact of a global slowdown. The government in the last Budget has fixed the fiscal deficit for the current fiscal at 2.5% of GDP, which is likely to be raised to 5% for the next fiscal, primarily on account of higher allocations towards the government’s flagship schemes like the Bharat Nirman and the National Rural Employment Guarantee Scheme.
To provide focus on urban infrastructure, the government may expand the ambit of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to include more districts. At present, the scheme is operational in about 60 mission cities. The other focus of the Budget is likely to be on rural development which may witness allocations going up to more than Rs 55,000 crore from Rs 39,000 crore, an increase of over 40%.
Hopes & projections
• Realty sector is banking on a relaxation of Section 80 IB(10)of the I-T Act
• Govt may propose lower tax growth due to meltdown
• Steel firms want schemes that will raise consumption of the commodity
• More districts may be included under JNNURM
The Financial Express, February 16, 2009, Page 1
fe Bureau
The government is hoping that the leading indicators of a partial hike in industrial production and a good rabi harvest will combine with the third stimulus package, to be released on Monday, and push the growth momentum of the economy.
The stimulus package, to be announced in the interim Budget, is again in line with a plan agreed by governments across the globe to go in for coordinated fiscal and monetary steps after the downturn peaked in September 2008. The government has been in touch with multilateral institutions such as the IMF and the World Bank on the broad contours of the package. Finance minister Pranab Mukherjee is expected to make a detailed review of the economy in his Budget speech to clarify the steps the government plans to take till May 2009, when the new government is sworn in. The government will target realty and the automobile sector, as they have massive linkages with the rest of the economy.
Anticipating the changes, the stocks of leading banks on Friday ended higher on the Bombay Stock Exchange. ICICI Bank ended 3.2% higher, while SBI too ended 3.1% higher—its highest close in a month.
The third largest, HDFC Bank, also ended 1.1% higher. The barometer Sensex added 168.91 points or 1.78% to close the day at 9,634.74 points.
The realty sector is banking on a relaxation of Section 80 IB(10)of the Income Tax Act. The section gives tax breaks for housing projects with flat sizes of less than 1,500 sq feet but is restricted to projects began before March 31, 2007. The builders felt that projects meant for low-income groups can take off if this date is extended.
The step could also be quite popular but as this involves a change in the direct tax laws, it would need an approval from Parliament unlike most changes in indirect tax laws.
Consequently, the relaxation for pushing up the slab for tax deduction from income for interest payment on housing loans, currently set at Rs 1.5 lakh, is unlikely to happen.
Realtors have also asked banks to ease the terms for giving them loans. Domestic funds are still more expensive compared with foreign funds. In the last stimulus package, realty sector was allowed to go for ECB for integrated townships only. The current demand is to allow it for all other segments of the sector.
Beside realty, the steel industry, hit by a slump in demand, wants the government to come out with schemes for the infrastructure sector in its interim Budget that would lead to higher consumption of the commodity.
“Real boost should be given to the infrastructure sector, which would in turn spur demand for steel in the economy,” SAIL chairman Sushil Kumar Roongta said.
“Interest rates to the borrower must come down to single digit. If that happens, things will become easier (in the economy) and steel demand would surge,” JSW Steel MD Sajjan Jindal said.
Besides, seeking sops for the infrastructure sector, the steel industry wants the government to increase the import duty on the commodity up to 15% as recommended by the steel ministry to protect producers against cheap dumping. “The government should impose 15% import duty soon on steel to protect the domestic industry,” Jindal said.
Commenting on the situation, home minister P Chidambaram on Friday said, “The 2009-10 will be a difficult one for our economy but there will be a turnaround from October or little thereafter.”
Asserting that India would post a 7% growth, he said a “right mix of policies and leadership” was required to steer the country through these difficult times.
Tax collections, another key element of the economy, in the next fiscal may be proposed to grow at moderate 15% in the interim Budget.
According to indications, the interim Budget would propose lower growth in tax receipts of the Centre due to the slowdown.
During the last few years, the Centre’s tax receipts have been growing by 25%.
The tax collections by the government for 2008-09 were proposed to grow by 25% at Rs 6,87,715 crore as per provisional estimates in the Budget. In 2007-08, the tax kitty grew by about 25% at Rs 5,85,410 crore as per the revised estimates.
However, for the current fiscal, direct tax collections posted a negative growth in November and December, before rising again in January. Collections from excise and customs duties are already in negative territory since October 2008.
In fact, collections from otherwise buoyant sector, services, dipped by 3.6% for the first time in December in the current financial year. In the direct tax collections, there is a gap of more than Rs 1,00,000 crore till January this fiscal. And this gap is against the provisional estimates of
Budget for direct tax collections at Rs 3,65,000 crore, whereas the Central Board of Direct Taxes had increased that target to Rs 3,95,000 crore after the first two months showed a remarkable increase.
The interim Budget is also likely to announce short-term measures for exporters reeling under the impact of a global slowdown. The government in the last Budget has fixed the fiscal deficit for the current fiscal at 2.5% of GDP, which is likely to be raised to 5% for the next fiscal, primarily on account of higher allocations towards the government’s flagship schemes like the Bharat Nirman and the National Rural Employment Guarantee Scheme.
To provide focus on urban infrastructure, the government may expand the ambit of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to include more districts. At present, the scheme is operational in about 60 mission cities. The other focus of the Budget is likely to be on rural development which may witness allocations going up to more than Rs 55,000 crore from Rs 39,000 crore, an increase of over 40%.
Hopes & projections
• Realty sector is banking on a relaxation of Section 80 IB(10)of the I-T Act
• Govt may propose lower tax growth due to meltdown
• Steel firms want schemes that will raise consumption of the commodity
• More districts may be included under JNNURM
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