Deepak Kapoor, Chairman, PwC India speaks to Anilesh Mahajan about his expectations from the upcoming Budget.
Q. Given the current challenges, what, in your opinion, would make for a good budget? What measures or proposals would you like to see?
A. The last year saw an environment of great regulatory uncertainty in the country, which led to foreign investment becoming very cautious. This is one key perception that needs to be proactively addressed this year.
Q. There are certain regulatory issues that need to be clarified and these include rolling out the goods and services tax (GST). Moreover key sectors such as retail, aviation and, particularly infrastructure, where we are seeking investments, should be made simpler for foreign investments.
A. For instance, single-window clearance should be available for high-value and important projects. Interest rates could be lowered to promote growth. Taxation remains a key tool to generate more revenue and efforts are under way to make it more robust and more realistic. Efforts should be made to improvise and streamline the tax administration process and prudent measures should be taken up to rein in non-tax compliance.
Q. Given the constraints the government faces in raising revenue, do you see a case to increase income tax rates on the rich?
A. This budget may have a proposal to tax the super rich a little more, and at the same time, the basic threshold exemption limit may be raised in order to provide relief to the lower income group.
The move would be more of a balancing act rather than looking at taxing the super rich as a permanent source to improve collections. This move could be to impose surcharge on those earning beyond Rs 20 lakh rather than raising the tax rates, as historically, maintaining lower rates has helped increase collections. With not even half a million declaring more than 20 lakh income, the government is likely to tighten up compliance to improve its tax collections.
Q. If the budget does not meet expectations, do you fear that business sentiment would once again dip?
A. Indian CEOs are an optimistic lot. I meet business heads from all over the world, and the one trait that seems to be unique in the ones from India is their optimistic outlook towards the economy. Most of them are confident that their business, as well as the economic health of the world, will only improve over the next few years. If you look at the findings of the 16th PwC Global CEO Survey, a remarkable 85 per cent of Indian CEOs are very confident of growth.
Having said that, the government must recognise areas where reforms are needed. Two such sectors, in my opinion, are health care and education. Both are part of the social sector and critical to the overall well-being of our nation. In health care, for example, the government could take appropriate measures to provide easy access to affordable and superior quality health services across the nation. In the education sector, we could shift the focus to investing in teacher training and other soft skills, to prevent a further decline in school education standards.