Budget 2022: Kiran Mazumdar-Shaw, Ashok Wadhwa And B Thiagarajan On Budget Hits And Misses

Ashok Wadhwa: Interestingly, the budget was not just short, but quite precise. And the speech and memorandum aligned itself quite well. The only thing that she (the Finance Minister) didn't cover is that if the government sells a public sector enterprise which is a loss-making enterprise—I guess Air India to begin with—then under the tax law the losses of the loss-making enterprise can actually be carried forward.

The law otherwise is that if you're an unlisted company with accumulated losses, those losses cannot be carried forward when there's a change in control. The benefit of carry-forward losses is available only to listed companies, not to unlisted companies when there's a change of control. That's the one thing she didn't point out. But I guess that's because it's obvious.

The Tatas are going to buy Air India and Air India has accumulated losses. And that deferred asset, the Deferred Tax asset, will be available as a set-off. So, in all the calculations that we are doing, perhaps we missed out on the fact that there is accumulated loss. The loss is a benefit to Tatas because they don't have to pay tax going forward for ‘x’ number of years. Other than that, honestly, she got it covered quite well. The budget this time was concise, the speech was concise, and the two were very aligned.

Ashok Wadhwa: As a matter of fact, this reminded me of Michelangelo's old saying on not aiming so low that you achieve it very easily, because (then) you don't know what you really missed. Apart from being very real and conservative, my concern is that they are too low.

If you look at the GST numbers for this month and extrapolate that going forward, you will probably exceed the revenue collection by a mile. Equally, the divestment target for last year was Rs 1.75 lakh crore. Of course, LIC constituted a large part of it. Obviously, LIC is going to get done this year. A target of Rs 65,000 crore is a very small target, particularly with the monetization of asset programmes that she has embarked upon. She began with the National Highways Authority of India (NHAI) and she then did Power Grid Corp. of India; she can do GAIL Ltd., she can do NHPC Ltd. She's got many other power generating assets. So my view is conservative, though I hope not over-conservative because we don't want to miss the opportunity of being able to collect more and be able to divest.

B Thiagarajan: I think it is in the right direction to put money predominantly in the capex part. Because anything else you do is not going to give you the long-term benefit. She (the Finance Minister) began by saying it is a 25-year kind of plan, the Prime Minister goes on to say that it is (about) building India for 100 years.

But the fact is that putting it in the capex part helps a lot. It creates employment. In order to improve our competitiveness, infrastructure is very important. It is very frustrating to run a business with such poor infrastructure in the country in its 75th year of Independence. So, it is consistent with last year’s theme.

We have to maintain this for at least three or four more years to be able to sustain this growth. Remember, this economic GDP growth has to happen for at least five or six years consistently at 8%+. We are on a small base and have just managed to reach the FY19 level, and it was not that in FY19, we were doing well in terms of GDP. So, it has to be maintained at this particular level and for that, infrastructure is important.

On the other hand, If we want to connect with the global supply chain, we must improve competitiveness, and for that, infrastructure is a key element.

Half the energy of the top management goes in (tackling) these kinds of frustrating issues which our peers across the world are not suffering from.

B Thiagarajan: I don't think we should go on that path at all. As of now, even if you look at the subsidies, there is a lot more to be done. A lot of money is getting wasted in the form of subsidies in many sectors. So, put the money in infrastructure building and other capex, so that there is employment generation. Employment is the solution.

Of course, one can argue whether infrastructure-related employment is permanent or temporary, but it will be a permanent thing for taking poverty out and putting more money in the hands of the people. I am of the view that it is not necessary to go and give some schemes in order that consumption will momentarily go up.

The production-linked incentive (PLI) schemes are also putting money in the hands of the people, not in the hands of the investor. Because any PLI given to us is going to lead to discounted prices.

Let’s talk about the air conditioning industry. The capacity is doubling in the next year; in 12 to 15 months, you will see the production capacity doubling after many decades. Now, the consumption has to go up in order to earn the PLI, because PLI is paid on incremental sales over FY21. So, if every one of us has to earn the money, we have to go ahead and grow the market. And if I build the scale, the costs will come down. In other words, in terms of the air conditioner prices, I foresee a 15 to 20% reduction automatically because of PLI.

B Thiagarajan: That is right. All the PLIs are going to boost consumption.

Kiran Mazumdar-Shaw: I commend the Finance Minister for not being prey to a populist budget, because this is election time. And you would have thought that she would come up with a populist budget, which she didn't.

It is a very growth-driven budget because the government is keen to create a strong and sustainable economy based on a couple of things. One is, of course, infrastructure investment. Secondly, the government is keen to look at a digital economy, which is driven by various digital platforms, including digital governance, digital healthcare, digital education – and that is also a good investment for the government to get into.

Now, have they neglected the middle classes? Have they missed out on giving some inducements to the people who've lost jobs during this pandemic? Yes, it can be argued that they could have done something, because you are going to get a much higher tax collection this fiscal than what was estimated or envisaged. So, could part of this extra tax be used to help some of these people who are stressed is a moot question.

But on the other hand, you need to get this economy on its own feet. And to that extent, opening up the economy is where I would go, and that's what the government needs to get into.

We are well vaccinated and we are safe enough to open the economy. And state governments have a huge responsibility to open up the economy and get the services sector back on track, because that is really where the consumption is hit. That is where you're seeing the financial stress.

Obviously, the capital expenditure has a lag phase; it's not going to be immediate. It is going to be mid- to long-term kind of paybacks, and the visible signs of growth are only going to happen after this lag phase. So, everything is directionally correct and it sets us onto a very predictable growth path.

So in that way, this has been a good budget. I'm quite impressed that they didn't yield to the pressures of getting into welfarism. But, on the other hand, execution is going to be key.

They've calibrated the divestment down. Have we lowballed everything in a very conservative way is the question.

Air India is a good indication that (through divestment) you create efficiency, business growth because the private sector knows how to market and grow the business. And that's what we really need to focus on. There are many assets that need to be divested and privatized.

Kiran Mazumdar-Shaw: In the healthcare sector, they focused on universal healthcare, digital healthcare, the universal health id. They are trying to invest in creating a very robust digital architecture for many sectors, including education. So, I'm not disappointed in that respect.

But what I was disappointed in my sector was the lack of understanding of the need to invest in R&D. I was expecting research-linked incentives. That is the need of the hour for our industry and for many industries. R&D needs to step up. No one's going to invest in R&D, unless there are incentives, especially in an industry like ours, which is high-risk and there is gestational payback when it comes to R&D investments.

Otherwise, you will keep investing in predictable low-risk R&D, which is not the way we should be growing. So, that is a big disappointment for me.

The budget is only a one-day event. I hope it's an evolving space and I hope that the government understands the need to invest in innovation and research. So, that's the only disappointment from my point of view.

But other than that, I am pleasantly surprised that the government created a very growth-oriented, bold budget.