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A share broker watches stock prices on a screen. India has increased its spending by 34 per cent and a bulk of it is focused on healthcare and infrastructure, which could be of interest to the UAE. — PTI

A share broker watches stock prices on a screen. India has increased its spending by 34 per cent and a bulk of it is focused on healthcare and infrastructure, which could be of interest to the UAE. — PTI

The budget was a fine balancing act by the Indian Finance Minister Nirmala Sitharaman, said experts during a virtual discussion organised by Khaleej Times.

Published: Tue 2 Feb 2021, 4:10 PM

Updated: Tue 2 Feb 2021, 4:11 PM

“This budget focused on Make in India, Atmanirbhar Bharat, ease of doing business, moves to make the tax system more transparent and efficient, streamlining of custom processes. It is clear that India wants to give a push to its manufacturing sector,” said Neeraj Ritolia, Chairman, ICAI Abu Dhabi Chapter.

“From the NRI perspective, the one-person company could be a gamechanger, and a lot of NRIs would be cheering for it. Secondly, the issue of double taxation of retirement funds has been addressed in this budget. We need to look into the details, but on the whole, it seems that NRIs will benefit from this move,” he added.

NRIs as such does not have any great advantage. The days of dollar bonds and NRI bonds are gone. The country is flush with liquidity and they do not need funds from NRIs to develop the country,” said Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services.

“I think there are some hiccups that NRIs face when they want to invest in India. For instance, there are higher tax deductions at source, then there are issues around compliance and regulations. NRIs were really looking forward to some reforms on the real estate front. They expected some benefits on interest and principal repayment on loans to propel the real estate sector in India,” Ramachandran added.

Overall, the government of India has increased its spending by 34 per cent and a bulk of it is focused on healthcare and infrastructure, which could be of interest to the UAE. “In infrastructure, the fact that they are talking about developing seven ports...that would be of interest to the likes of the DP World. India is talking about privatising airports, which would be interest to airline majors in the UAE. So there is a lot of focus on construction, which needs capital. Capital from here can go to India,” said Anita Yadav, Chief executive of Global Credit Advisory Limited.

“India is also talking about privatization of PSUs, so there will be interest in acquiring government assets there. The finance minister talked about a skill agreement, where human capital coming from India and skill-share will happen. Besides, there will be flow of capital, with not only India attracting FDI from the UAE but also attracting UAE firms for providing healthcare services to India and infrastructure,” she said.

The rising deficit has raised concerns among global credit rating agencies. While S&P is accommodative, Moody’s has been strict in its assessment. But should India worry about it? “Expansionary budget means government is spending far more than what their revenue base is. So, this financial year, the estimated budget deficit is 9.5 per cent, which is huge. Now, these are exceptional times, and it is understandable that it would not have been possible for India to keep the budget deficit in control.

“They have to spend. A downward rating by Moody’s should not impact India much because the Indian government doesn’t have much investments in dollar bonds and securities. A downgrade in India’s rating could on the other hand impact bonds issued by some energy companies, banks, which are held by NRIs. If their credit ratings go down, then the prices of bonds will fall, which will impact not only institutional investors, but also the NRIs.” Ramachandran, on the other hand, suggested ignoring ratings for the sake of growth. “There is no country in the world that doesn’t have a deficit today. So, we should not worry on those grounds.”

India is also facing record high unemployment. The youth is under-employed, and the budget throws has no solutions. “There is nothing in the budget that gives some comfort to the youth in terms of job creation. Real estate sector, too, is neglected. “The only major drawback that I see in the budget was the lack of measures for the real estate sector,” said Ramachandran.

—suneeti@khaleejtimes.com



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