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Budget 2019: FM has addressed structural issues, says RPG Enterprises' Pramod Menon

The Budget had a special focus on promoting digital economy, which Menon said will help in curbing inefficiencies related to cash payments, said Menon, Group CFO of RPG Enterprises

July 05, 2019 / 07:38 PM IST
 
 
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As well as addressing the needs of the economy on several fronts, Union Budget 2019 has also given a direction to what the government wants to do in the next five years, said Pramod Menon, Group Chief Financial Officer, RPG Enterprises.

"The Budget has addressed some of the structural issues in the economy, and has allocated funds accordingly," Menon told Moneycontrol. 

Menon highlighted Budget announcements such as One Grid One Nation and roll out of PPP model for development of railways that will address some of the basic issues facing the country.

The Budget had a special focus on promoting the digital economy, which Menon said will help in curbing inefficiencies related to cash payments.

Finance Minister Nirmala Sitharaman in her Budget 2019 speech on July 5 announced that 2 percent tax deducted at source (TDS) would be levied on cash withdrawal exceeding Rs 1 crore for a year from a bank account.

The move is aimed at promoting digital payments and discouraging cash transactions.

Green impetus

Menon, a board member at RPG Enterprises, underlined initiatives that give a push to green technology.

In an effort to make electric vehicles more affordable, the Finance Minister has proposed to provide an income tax deduction of Rs 1.5 lakh on the interest paid on loan taken to buy EVs.

The budget has also proposed investment-linked tax benefit for the manufacture of products like lithium batteries and solar chargers.

Better credit offtake

"The Rs 70,000 crore additional capital for public sector banks, steps to revive the NBFC sector and bringing housing finance company under the preview of the RBI, will improve credit take off," said Menon.

The government, he added, is also taking steps to attract global liquidity by increasing public shareholding, deepening the debt market and by increasing the target of divestment.

While the companies in the RPG Group have low debt leverage and thus are not impacted by the low credit offtake, some of them were impacted indirectly. "Ceat has dealers and there are MSME owners who were facing the credit squeeze. And this was impacting us. Now these steps will ease the pain in working capital," said Menon.

He added that the infrastructure spend will boost group company KEC International, which is India's second largest manufacturer of electric power transmission towers and one of the largest power transmission EPC companies in the world.

Markets reaction

After the Budget speech, the BSE Sensex closed the day down 394.67 points at 39,513.39 and the Nifty50 declined 135.60 points to 11,811.20.

Menon said the markets may have reacted to the Budget proposal to increase public shareholding in companies. "The question is how will some of the big companies dilute," he said.

Also, he added, the market may be concerned about some of the estimation. According to the Budget proposal, the government is expecting to see a 19.9 percent jump in custom duty collections, and that of excise duty by 15.6 percent. The government is also expecting corporate tax collection to go up by 14.2 percent.

"These are big jumps, and the market would need to have more details," said Menon.

Prince Mathews Thomas
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Jul 5, 2019 07:38 pm

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