Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
FM could have done a lot more in Budget 2011: Mr. Kanu Doshi - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 9, 2011

    FM could have done a lot more in Budget 2011: Mr. Kanu Doshi

    PersonalFN is privileged to bring to you Mr. Kanu Doshi, Partner with Kanu Doshi Associates,

    Chartered Accountants and Dean (Finance) at Welingkar Institute of Management Development & Research

    PersonalFN: On a personal front are you satisfied with the Budget 2011-12; and what do you think are the positives of this Budget?

    Mr. Doshi: Overall, I am not satisfied with the budget. - FM (Finance Minster) could have done lot more than what he has done. Considering the turbulent times - because we are not still out of the woods, India is still under the adverse effects of whatever wrong has happened financially globally. Therefore, he could have done a few bolder things on direct tax front, and on indirect tax front, as well as on general allocation of funds for giving a real boost to the Indian economy. So, he has virtually treated the budget for the year 2011 - 2012 as a normal year, while all of us in this country are convinced that it's not a normal year. Therefore, he should have done something bold, something far more than what he has done. So this first reaction.

    On the personal tax front he has given very token reliefs and we welcome them howsoever little. Thus basic exemption for general category of tax payers (and not women or senior citizen) is raised, from Rs. 1.60 lakh to Rs. 1.80 lakh. For women it is retained at Rs. 1.90 lakh and for senior citizen it is raised from Rs. 2.40 lakh to Rs. 2.50 lakh. FM has brought in this year a new "Very Senior Citizen" category at Rs. 5.00 lakh for 80 years & above. Yet another good thing that he has done is age of 65 has been brought down to 60 (for being classified as senior citizen). Representations from several organisations for fixing uniform age of 60 applicable to senior citizens have helped, and this would benefit substantially people who are now retiring at the age of 60. But for being eligible one has to have completed 60 (year f age) or 80 by the last day of the accounting year ending 31st March 2012.

    PersonalFN: So, do you think the Budget 2011-2012 is really populist in a way?

    Mr. Doshi: In a way I would strongly say yes. But these very senior citizens somewhere I read, who are having income upto Rs. 5.00 lakh and above or around Rs. 5.00 lakh, is just 5,000 in number. But nonetheless he has made a wonderful gesture, but (reducing the age for someone to be classified as senior citizen) 65 years to 60 would benefit substantial portion of the population - substantial portion!

    And with the revenue loss on that front, will no doubt be tolerably good. That's why he (Mr. Mukherjee) has worked out Rs. 11,500 crore as revenue loss on the direct tax front, and he will make up Rs. 11,300 crore by the way of service tax and bit of excise. He has widened the scope of few services.

    PersonalFN: But in a situation where we already facing inflationary pressures, people are feeling a pinch on their pocket - do you think it was a valid move to increase service tax especially on air travel and healthcare, where centrally air-conditioned hospitals having beds over 25 in number, will be subject to a service tax now?

    Mr. Doshi: What you are saying is right, and there's serious re- thinking on the imposition of service tax on the healthcare segment. It may be rolled back.

    Coming back to increase in service tax on travel, I believe that (FM) has been selective. On travel, he has increased the business class air travel, but not railway travel. A person who travels by air is better placed than a person who travels by rail- that's (FM's) logic. And don't forget that the Government does need revenue, so this was one source (viz. service tax) which he thought it fit to tap. But despite the increase, people will continue to travel by air. If petrol prices are any guide, any increase in petrol prices has not reduced our traffic jams caused by cars and more cars. They continue to be as bad as ever.

    PersonalFN: The Government has kept that into mind - they have not really tinkered much on the import duty of oil.

    Mr. Doshi: Yes, on the ground that it was already very volatile. Turmoil in Lybia is worrying and any increase over $110 will hurt our economy.

    PersonalFN: Earlier, you mentioned about the negative of this budget also. Any other thing which you think the Government has still left in loop holes, in terms of the negatives for the budget 2011-12. Loop holes which are not been addressed to at all till date by any of the budgets so far - it may be on the infrastructure front, power problems in rural areas, education. You think allocations could have gone up in some sectors?

    Mr. Doshi: Education - so dear to my heart because I make a living out of serving that sector; could have been provided a much larger financial support. FM has made allocations to few select institutions - Rs. 21 crore to IITs, etc, so only that. Shouldn't he have given support across the board? By all means, do impose certain restrictions - meaning educational institutions must be AICTE approved. But look at the irony. On one hand you say "demographic dividend" is itself a challenge but you have done nothing much in that direction. Demography at the moment is in our favour, but if you neglect to look after educating them and preparing them for gainful jobs, you may face a giant problem.

    PersonalFN: Sir, similarly on the economic front, do you think that the allocation towards infrastructure, education, creating employment opportunities in rural areas - giving them more benefit; would help us achieve 9.0% growth projected (within a range +/- 0.25%), and would they come to that target of 4.6% for 2011-12?

    Mr. Doshi: While that several people - and you are not the only one to express cynicism on the 9.0% GDP growth rate, I am extremely bullish and optimistic that if this Finance Minister believes that 9.0% can be achieved, he will achieve it - not that he has any magic wand, but we all know that all these GDP numbers do not fully capture the "black economy". So, it was Mr. K.V. Kamath of ICICI Bank Ltd. for the first time publicly said that if our GDP is 8.5% - actually it is 12.5%. So that's why I believe 9.0% is achievable for the coming years.

    What is significant is that the FM has in a retained the figure of Rs. 40,000 crore for PSU disinvestment proceeds. And now he will have to keep capital market & economy buoyant.

    When DTC first came in 2009 under Mr. Chidambaram, he had taken away the exemption for equity shares and he had also recommended EET (Exempt Exempt Taxation) for savings. In 2010, Mr. Mukherjee took over and he removed that team altogether and restored the exemption for long-term capital gains on listed equity shares. Similarly, he has also retained the EEE (Exempt Exempt Exempt) status. The point I'm trying to say is (FM) is a much wiser man now, but for achieving the 9.0% growth, he has to be very industry friendly and investor friendly.

    PersonalFN: Coming back on the DTC point, do you think with the new team which has taken over ever since Mr. Mukherjee has come in, do you think the DTC will take its right form? Because there has been some lobbying taking place for example the insurance industry has been favoured by giving an exemption under Section 80C, while ELSS will be withdrawn now i.e. it will not form a part of section 80C. So in this context do you think the DTC will take it right form, and ELSS would be restored in section 80C?

    Mr. Doshi: Yes, the two examples you have citied are very correct. But knowing the mutual fund industry, it is not unduly dependent on ELSS. You'll be amazed to know the quantum of money - small quantum of money is coming in ELSS. So the industry is not much worried on ELSS going away in DTC, because, the industry is aware that major part of 80C (investment) goes in only two instruments - Life insurance premium and PPF (Public Provident Fund). So, the entire quota of Rs. 1lakh (maximum deduction available under section 80C) is taken up by these two (investments).

    PersonalFN: The Finance Minister has done a very smart thing by allowing foreign investors to invest in equity mutual funds in India. Do you thing that was right move in favour of the mutual fund industry which is suffering in terms garnering more AUM, after the entry loads were banned?

    Mr. Doshi: It's the nicest thing to have happened. Mutual funds are extremely happy and they are looking forward to tapping this money from the non-residents and foreigners. Of course some doubts are raised with respect to KYC. Now how to expect some Mr. John Smith in Chicago, U.S.A to obtain a PAN (Permanent Account Number) in India, because PAN is one of the items for KYC. But when it comes to nuts and bolts, SEBI would be told that - if Bill Gates invests money he has his social security card in U.S.A, which serves as a KYC in USA. So we should accept that.

    PersonalFN: Sir, by getting in foreign investors to invest in India - just like FIIs who push in and pull out money which brings in immense volatility in the markets; do you think volatility will be infused with foreign investors investing in India?

    Mr. Doshi: We have received U.S. $ 30 billion, from FII and our index has gone to very healthy at - about 18000 plus (level). When they (FIIs) come in, the market goes up by 15%, and when they pull out even U.S. $ 2 billion, market falls by 15% - so we are getting good stocks cheap by 15%. So this is the answer to that point of volatility - that yes it will lead to volatility. But only FIIs are causing this; here individuals - one say Mr. John Smith is going to invest. Mr. John Smith by himself may not be that volatile.

    PersonalFN: Sir just the final question. On a scale of 1 to 10 (10 being the highest), how would you rate the budget?

    Mr. Doshi: I would give it a 5 on 10. The reason is he could have done much better. May be he had his constraint of assembly elections in five important states.

    PersonalFN: Thank you so much Sir, for your precious time and insights.

    This article has been sourced from PersonalFN has been providing independent research since 1999 on mutual funds, insurance, fixed income instruments and gold. It also provides research based advice on investments and financial planning to individual clients. To know about our financial planning services, simply write to info@personalfn.com.


    The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.



    Equitymaster requests your view! Post a comment on "FM could have done a lot more in Budget 2011: Mr. Kanu Doshi". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms