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Monday, 04 Mar 2013
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Revival of Private Investment is the key to India’s GDP Growth
Private Investment_SBI Capital Market_Expert Speak

Yashpal Singh,
Vice President - Infra Group,
SBI Capital Markets


Question_ExpertSpeak_ProjectsTodayWhat is your overall opinion about Budget 2013-14?


First, by adhering to the fiscal targets, i.e by pegging the fiscal deficit for FY13 at 5.2 per cent of GDP and committing to a deficit of 4.8 per cent for FY14, FM has tried to solve the issue of rating downgrade by international rating agencies and given room to RBI for monetary easing. Also announcement of inflation indexed bonds is an attempt in the direction to control current account deficit and inflation. Secondly, there are some encouraging measures like investment allowance, extension of section 80-IA for power sector, providing low cost funds to renewable energy projects, review of profit sharing model in Oil & gas, over 3,000 km road projects will help to boost the infrastructure sector.


Question_ExpertSpeak_ProjectsTodayDo you believe the FM has done enough to spur investment?


Caught between a declining growth and increased fiscal deficit, FM has given a good impetus to investment within limited expenditure possible. Budget aims to raise Rs. 50,000 crore through tax free bonds which will help institutions to finance projects solving asset liability mismatch problems. The government also seeks to increase the funding options for the infrastructure projects through credit enhancement schemes floated by IIFCL. The budget also provides Rs. 5000 crore to NABARD for financing warehouse capacity. Investment allowance for 15 per cent of the investment has been given to quicken the pace of implementation.


The budget also proposed to take up Gujarat and Maharashtra under Delhi Mumbai industrial corridor. The ports had a dismal performance in 11th plan period, has got major boost by announcement of creation of 142 million tonne cargo handling capacity. Also setting up a transmission line from Srinagar via Leh to connect the northern grid will help power sector.


Question_ExpertSpeak_ProjectsTodayHow far he will succeed in curtailing current account deficit?


By encouraging the consumers to save in financial instruments in the form of inflation indexed bonds, will help reduce the import of gold and can thereby help reducing current account deficit. Also by committing to lower fiscal deficit will translate into a lower current account deficit thereby providing more stable exchange rate for Indian companies and reducing the cost of external borrowings. The idea of passing on the cost by pooling of imported coal, natural gas pooling and passing on diesel cost will help reduce current account deficit.


Question_ExpertSpeak_ProjectsTodayInvestment allowance to large size projects and extension of 80IA to power projects, Your opinion?


The revival of private investment is a key to raise India’s GDP growth, which is estimated to have reached a decadal low of 5.0 per cent in FY13. In order to improve the investment climate, the government has announced an investment allowance of upto 15.0 per cent of the total investments over Rs. 100 crore in plant and machinery during the two years ending March 2015. This will help in asset creation.Extension of 80 IA for power projects will help benefit the those projects which are scheduled to be commissioned till then.


Question_ExpertSpeak_ProjectsTodayWill the sops extended to real estate sector will be able to revive the sector?


The announcement of additional deduction of interest up to Rs. one lakh on a person taking his first home loan for an amount up to Rs. 25 lakh will fail to enthuse developers as most of big players operate in cities which have already crossed this number. However, this will help those people who construct their own houses. Also this can help developers in low cost housing cities. The announcement of putting a TDS on property transaction beyond Rs. 50 lakh will be disappointment for developers in big cities.




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