27-03-2014, 10:48 AM
Union Budget 2013-14: Lacks pragmatism; creates confusion
Lacks pragmatism.pdf (Size: 218.51 KB / Downloads: 13)
INTRODUCTION
The Union Budget for FY2013-14 has failed to meet the
heightened expectations of the Street. There are no big-
bang announcements to revitalise the investment cycle
or any material incentives to attract savings in the capital
markets. But the key issue that has unnerved the equity
market is the confusion over the retrospective changes
suggested in Section 90A of the Income Tax Act relating to
existing tax relief to foreign investments from countries
having a Double Taxation Avoidance Agreement (DTAA) with
India.
The high expectations were built due to the policy activism
shown by the government in the past few months and the
commitments made by the finance minister during his
recent interaction with foreign investors. But the issue
created by the unimaginative drafting of the explanation
for Section 90A has now caused confusion among foreign
investors. The finance minister and his team did clarify in
the post-budget speech during a media interaction that
nothing new has been incorporated and the situation would
largely remain unchanged. However, the uncertainty has
dented sentiments and come at a time when the finance
minister has himself highlighted the dependence of Indian
economy on foreign inflows (to the tune of $75 billion in
FY2014) for controlling the widening current account
deficit.