Union Budget 2015: Insights for Capital Markets
By Shriram Subramanian
Regulatory environment is set for major changes. Prominent among them are:
• New Comprehensive Bankruptcy Code proposed. Intended to spur entrepreneurship and investments as the shortcomings in both SICA (Sick Industrial Companies Act) and BIFR (Board for Industrial and Financial Reconstruction) is expected to be rectified.
• SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act extended to large NBFCs. This should make lending easier as the lenders control over security pledged.
• FMC (Forward Markets Commission) to merge with SEBI for better control over derivatives as commodities and securities markets under a single regulator.
• Indian Financial Code to streamline different regulations in the financial sector is proposed. Intended to provide a fillip to India as global financial centre.
Tax laws simplification and stability intended through:
• Reduction in Corporate tax rates to be nullified by eliminating tax exemptions. 5% reduction in corporate tax rates not to impact the current effective tax rate of 23%.
• GAAR (General Anti-Avoidance Rule) deferred by two years to March 2017. Comfort given to FIIs could contribute to larger investment flows into India.
• GST (Goods and Services Tax) implementation by April 1, 2016 to promote greater trade in India.
• Distinction between FPI and FDI will be done away with. Fungibility in FDI & FPI will benefit private sector banks.
• Foreign investments in Alternate Investment Funds to be allowed. This could increase flows into asset categories outside the stock exchanges. Private equity, venture capital, infrastructure and real estate to be among the biggest beneficiaries