Budget focuses on pumping infra, digital economy: KPMG

Budget focuses on pumping infra, digital economy: KPMG

Arun M. Kumar, Chairman and CEO, KPMG in India

Focus: Priming the pump for investment

“The Budget’s emphasis on priming the pump for investment broadly — recapitalisation of public sector banks to make room for additional lending, creating a social stock exchange, schemes for entrepreneurs including the agro-economy, strengthening RBI’s regulatory role with NBFCs and making RBI the regulator for housing finance are all welcome steps. The focus on investment is also reflected in the announcement of an expert committee to suggest ways to address the challenges of infrastructure financing.”

Elias George National Head - Infrastructure, Government & Healthcare, KPMG in India

Sector: Infrastructure

“The budget has put in place the basic architecture for moving India closer towards our new goal of becoming a USD 5 trillion economy by 2024-25. The budget rightly focusses on augmentation of physical and social infrastructure, particularly transportation infrastructure, customer-centric universal travel, integrated water management for ensuring clean water availability to all by 2025, ‘One nation, One grid’ for universal power availability and countrywide provision of internet infrastructure and measures to improve the ease of living. A number of measures have also been proposed to enhance private investment levels in the country for bridging our infrastructure deficit. Particularly welcome are the budget interventions aimed towards improving women’s welfare.”

Akhil Bansal, Deputy CEO, KPMG in India

Focus: Overall budget

“It is a budget that aims at stimulating the economy, incentivizing businesses, promoting skill development and improving digital inclusion. It gives equally important focus to ensure that all sections of our economy benefit from the current phase of growth. In summary, it has all elements needed to place the economy on the right track to become a $5 trillion economy.  The budget rightly recognizes the need to boost lending by stabilizing the balance sheets of PSUs. While addressing essential needs of the economy, the finance minister was careful not to deviate from the fiscal consolidation path, something that may be appreciated by investors.”

Sachin Menon, Partner and Head, Indirect Tax, KPMG in India

Focus: Indirect Tax

“The current budget proposals seem to reiterate steps to simplify the GST compliance recommended by the GST council by introducing single return, automated refund mechanism, centralized e-invoicing, the abolition of e-waybills etc. with an eye to improving compliance and revenue buoyancy. On the customs side, it seems the reduction and increase in customs duty on raw materials and capital goods are principally aimed at encouraging the “Make in India” initiative. The announcement of legacy dispute resolution scheme will give an opportunity to the taxpayers to settle legacy litigations related to service tax and excise duty.”

Harpreet Singh, Partner, Indirect Tax, KPMG in India

Focus: Indirect Tax

 “On expected lines there were no new announcements on GST. The Finance Minister only reiterated recent recommendations of GST Council on upcoming simplified single return system, automated refund mechanism, E-invoicing and likely discontinuance of E-waybills”

Jaideep Ghosh, Partner & National Head – Transport, Leisure & Sports

Focus: Overall Budget


Union Budget 2019 continues the emphasis to create physical and social infrastructure backed by digital platforms, which are principal ingredients to continue our high growth.  Transportation infrastructure stands out among the priorities outlined in the Union Budget.

 Continued creation of comprehensive transport infrastructure and financing of the same are critical elements for economic growth. The Finance Minister started her speech highlighting the contribution of integrated transport infrastructure towards economic growth.

 Through the Bharatmala initiative, rapid construction of country-wide road infrastructure is slated to accelerate. Besides enhancing port connectivity, the Sagarmala project aims to create port-led coastal economic zones. Inland waterways, which remained largely under-utilised, are now being rapidly developed for freight and passenger transportation. Aviation is a priority area; the continued emphasis on regional connectivity, focus on MRO/aviation engineering and encouragement for domestic financing for aircraft leasing is a welcome move. Expanded private participation in rail infrastructure such as freight corridors, rake manufacturing to station modernisation will unlock massive value if implemented with a rigorous focus. Metro rail continues to upgrade urban development.

 Policy push and direct tax benefits towards much faster adoption of Electric Vehicle could alter the transportation industry landscape, with environmental benefits. Creating such a massive infrastructure needs a different level of financial resources. Recognising the current challenges, the budget proposes to open up and ease newer routes, especially overseas avenues such as FDI/FPI and corporate bonds.

 At the same time, apart from capitalisation of banks, how stimuli will be generated domestically is less clear. Perhaps we wait for the monetary policy measures during the year. Transport is the backbone of an economy. The reforms proposed in infrastructure financing, as well as the massive investment boost for transport infrastructure along with effective implementation, will go a long way towards India realising the dream of, becoming a USD5 trillion economy.

Neeraj Bansal, Partner, Advisory Services, KPMG in India

Focus: Affordable Housing

“Significant boost to affordable housing with an additional deduction on interest on housing loan with potential savings up-to INR 9.3 lacs for a single household for people with income less than 18 lacs on max loan amount is welcome. This will create new demand for houses up-to INR 45 lacs in the current year which is a big positive for the affordable housing developers”

Vivek Gupta, Partner and National Head – M&A/ PE Tax, KPMG in India

Focus: Minimum Public Shareholding

The Finance Minister urging SEBI to relook at and increase the minimum public float from 25% to 35% is something that will need to be carefully considered. If it is made applicable to existing listed companies, we estimate that this will perhaps impact close to 20 per cent of all listed companies. That will need substantial capital - which may not be readily available. Perhaps, SEBI may make this applicable for new IPOs initially only.”

Focus: Relaxation of FDI

“It is clear that India needs investment dollars to drive growth. The statement regarding easing FDI norms for aviation, media, single brand retail and insurance intermediaries is welcome and will spur investments - but the more interesting signals are on enabling further FPI participation in debt as well as the soundings around allowing more capital into REIT and INVIT platforms.”

Parizad Sirwalla, Partner and Head, Global Mobility Services – Tax, KPMG in India

Focus: Personal Taxation

“On the personal tax front, additional interest deduction on affordable housing home loans and purchase of e-vehicles provides relief. Interchangeability of PAN and Aadhaar, pre-filled tax forms, e-assessments, is in line with the objective to ease tax administration and create greater transparency. The proposed merger of all labour laws into 4 labour codes will aim at accelerating growth. The tax outgo of super-rich earning income above certain thresholds will increase.”

Nilaya Varma, Partner and Leader Markets Enablement, KPMG in India

Focus: Investment

“The Budget addresses key elements for the new India. Reviving private Investments, driving consumption- especially Rural, using programs to drive behavioral changes, improving institutional capacity to deliver and improve overall Infrastructure but the focus will have to be on time bound implementation to drive initiatives into action.”

Vivek Gupta, Partner and National Head – M&A/ PE Tax, KPMG in India

Focus: Minimum public shareholding

“Move for moving minimum public shareholding for listed companies from 25% to 35% must be implemented carefully. Timing, applicability, etc to be closely evaluated - we don’t want this to be another “forced sale”. Good opportunity for institutional capital and funds.”

Manish Jain, Partner – Digital, KPMG in India

Focus: Digital 

India has taken a big leap in digital data; digital infrastructure has widened, and we can harness AI and analytics for governance and enhancing the revenue. 

Research needs lots of focus in the third largest economy in the world.

The digital economy will get a big boost with the investments going forward. 

Bharat net will bridge the gap in digital literacy between rural and urban divide. Public private partnership will be key for the execution.

Leveraging DD channel for startups will give platform to showcase the innovation and amplify the innovation demand supply chain.

Dr. Waman Parkhi, Partner, Indirect Tax, KPMG in India

Focus: Overall Budget

“Budget with a clear goal of long-term growth. Industry and common man waited for favorable announcements with bated breath, as this was the first budget of the new Government, however, there were no big bang announcements in the Union Budget 2019 to whip up economic growth as was expected. 

The Finance Minister introduced a slew of measures with the goal to stimulate growth, support the strained financial sector, encourage start-ups and promote digital economy. However, no specific measures to boost exports were announced in the speech.


With the introduction of interchangeability of PAN with Aadhar, proposal for pre-populated income tax returns, faceless e-assessments, the budget paved way for simplified tax administration and bringing in greater transparency in the system.


On the indirect tax front, the speech highlighted various initiatives that are underway to simplify GST processes. A Legacy Dispute Resolution Scheme for quick closure of pending litigations under the erstwhile indirect tax regime would provide much needed relief to industry and revenues to Government. Overall, the budget is an indication of long term growth intent at a broader level.”

Jaideep Ghosh, Partner & National Head – Transport, Leisure & Sports

Focus: Transport Infrastructure

“Transport infrastructure is the backbone of an economy. The reforms proposed in infrastructure financing as well as the massive investment boost for transport infrastructure along with effective implementation will go a long way towards India realizing its dream of, becoming a  $5trillion  economy”


Focus: Travel & Tourism

“Travel & Tourism contributes nearly ten percent of our GDP. Union Budget 2019 continues to encourage promoting heritage attractions and proposes a digital repository for tribal and rural tourism attractions. These measures along with the proposed massive transport and social infrastructure backed by digital platforms and financial sector reforms will further boost tourism.”

Harsha Razdan, Partner and Head, Consumer Markets, KPMG in India

Focus: Rural Economy

“The rural consumer’s untapped potential is quite evident, as India aspires to be a $ 5 trillion economy. Keeping this in mind, the budget has heavily focused on famer productivity, ‘aam aadmi’ and rural upliftment to drive consumption. The budget seems to take a leaf from the economic survey about driving a ‘virtuous cycle’ wherein investment, agricultural productivity, job creation feed into each other to drive growth and consumption. Robust implementation of this vision will be key!”

Manish Aggarwal, Partner, Special Situations Group, KPMG in India

Focus: Infrastructure

“The Budget 2019-20 has put out a positive tone & intent for infrastructure sector overall. Transport sector gets a big push. Integrated infra development articulated as vision. Execution, however, is key and big ‘if’.


A Rs. 100 Lakh Crore investment has been envisaged in infrastructure space over next 5 years with focus on mobility, rural access, urban rejuvenation and basic infrastructure for the masses. Mission mode infrastructure creation like SAUBHAGYA and UJJWALA finds replication in Jal Jeevan Mission which aims to bring potable water connection to nearly 24 Crore rural households. E-mobility has got a major boost via significant budgetary allocations as well as tax incentives for end-users. PPPs in Railways for select areas a very welcome move


The FM’s speech moots a path to consider generating financing pools for the vast capital requirements. The Credit Enhancement Guarantee Corporation and bond market measures if implemented well would yield benefit over a longer term.


Short term recapitalization of public sector banks to the tune of Rs. 70,000 crores have been provided to boost lending. PPP model needs to be rebooted and the FM has recognized the need for it. Debottlenecking of the balance sheet crisis has found mention in the preliminary success of the Insolvency & Bankruptcy Code wherein the overall NPAs have come down by Rs 1 Lakh Crore in the previous year. Review of UDAY scheme, tariff policy, working with states to remove cross subsidy surcharges and open access charges are well outlined as well measured intents, though again one should be cautious and see how it is executed.


Overall a budget with strong vision, intent, which outlines a comprehensive integrated infrastructure play. It also highlights solutions for accessing long term capital and attempts to address some key issues especially in power sector that contributed to huge stress. Budget also Incentivises EVs and sustainable infra build up. However, Key will lie in focused execution where often we have faltered. I also did not see any concrete measures for reviving private sector investments especially the domestic one.”

Chintan Patel, Partner - Deal Advisory, Head - Building, Construction & Real Estate, KPMG India

Focus: Housing

“The budget has brought forth positive interventions to accelerate the ‘Housing for All 2022’ agenda of the Government. Focused initiatives such as Implementation of the Rental Housing Scheme, delinking of financing and regulatory powers between NHB, HFCs and RBI, Direct Benefit Transfer to ease construction technology adoption will provide immense fillip to housing development. Enhancement of housing loan interest exemption limit by INR 1.5 lacs will enable positive sentiments amongst consumers. Allowance of Foreign Portfolio Investors (FPIs) to subscribe to listed debt securities under REITs and InvITs mechanisms will further boost foreign investor participation. These steps showcase the intent of the current Government.”


“I believe the additional tax benefit of 1.5 lakhs to affordable housing unit buyer is going to incentivize customers to evaluate this segment more seriously. The developer community is also expected to develop more projects in this segment, with the expanding customer base. Additionally, the government is likely to provide opportunities to private parties for developing affordable housing projects on land banks held by central ministries & CPSEs on a joint development or concessionaire contract basis. This would be a good alternate capital light option for developers to expand their portfolios. The budget further proposes development of railways as well as metro projects on Public Private Partnership (PPP) basis. This impetus would create opportunities for developers to evaluate asset segments like co-living / student accommodation projects as part of land monetization for transit-oriented developments. Government’s plan to introduce the Model Tenancy Law for rental housing is expected to improve the balance between the rights & responsibilities of the landlords & tenants with respect to aspects of tenancy like rent, security deposit, escalation, etc. This is a great initiative for the segment and would go a long way in securing tenancy rights. 


On the flip side, the finance minister proposed to increase customs duties on certain specific building materials which is expected to put further pressure on construction costs, largely for high-end residential projects. In terms of funding, RBI’s regulatory involvement in the housing finance sector is expected to lead to lenders facing more stringent asset quality reviews. Considering the current crisis in the sector, this move is laudable.”

Himanshu Parekh, Partner and Head, Corporate and International Tax, KPMG in India

Focus: Overall Budget

“The first Budget of the Modi 2.0 Government has lots for everyone to cheer about. The main areas of focus were measures to boost infrastructure development, affordable housing and education, as also host of benefits for start-ups and MSMEs. This was coupled with important policy announcements with respect to tenancy laws, labour laws, power tariff policy and relaxation in FDI norms for media, aviation and insurance sectors. The FM also addressed the challenges in NBFC sector which had almost paralyzed liquidity in the market. However, considering that there was no mention about the expenditure layouts for various initiatives and the sources of revenues, in the speech, we will have to look at the fine print of the Budget thereon. Directionally, it was a pro-reform Budget which is likely to fuel growth and investment, so as to help India reach the goal of a USD 5 trillion economy.”

Harpreet Singh, Partner, Indirect Tax, KPMG in India

Focus: GST

“On GST, the FM reiterated recent recommendations of the GST Council on simplified return structure, automated refund mechanism, E-invoicing which obviates need for separate E-way bill from Jan 2020 and reduction in GST rate for electrical vehicles from 12 to 5%.


Some other key amendments proposed in the GST law are introduction of composition scheme for supplier of services, increase in exemption threshold to INR 40 lacs in case of exclusive supplier of goods, mandatory Aadhaar authentication for new registrations, unification of electronic cash ledger, levy of interest on net cash liability, constitution of National Appellate Authority for Advance Ruling and 10% penalty on a taxpayer if the quantified profiteered amount is not deposited within 30 days.


On customs, Basic Customs Duty (BCD) has been reduced on defense equipment; specified raw materials & capital goods; parts of electronic vehicles and capital goods required for manufacture of specified electronic goods.


In order to provide level playing field for domestic industry under ‘Make in India Initiative’, BCD has been increased on products like PVC, tiles, metal fittings, marble slabs, auto-parts, CCTV camera, optical fibre cable, books, gold etc. Also, exemption from custom duty on certain electronic items which are now being manufactured in India has been withdrawn. Another key proposal is for setting up of legacy dispute resolution scheme for speedy disposal of pre-GST litigations.”

Gayathri Parthasarathy, Partner and Head, Financial Services, KPMG in India

Focus: Financial Services

With the objective of enabling Indian economy to become US$ 5 trillion in few years with the help of strong and vibrant financial services sector, the union budget FY 19-20 has proposed several initiatives. The Capital infusion of Rs. 70,000 crores in PSU banks will boost credit offtake in the economy. The Government’s commitment to financially sound NBFCs was indicated by their willingness to provide first loss cover upto 10% on portfolio sold to PSBs.

To further strengthen and improve the outlook of the NBFC sector, the government has provided few liquidity enhancing and also regulatory measures.  Key ones are as follows:

—   Steps have been taken through tax measures to bring deposit- taking NBFCs and systematically important non-deposit taking NBFCs at par with banks and other public financial institutions.

—   The Participation of FPI and FDI in the bond market is expected to ease liquidity.

—   HFCs now will be regulated by RBI which will provide more uniform regulatory environment to the lending segment.  Further, regulator’s supervision on NBFCs will be enhanced.  Measures to support financially sound NBFCs and higher regulatory RBI monitoring will drive consolidation of weaker NBFCs

—   100 percent FDI in insurance intermediaries will help in building distribution scale and penetration of insurance products

Nabin Ballodia, Partner, Tax, KPMG in India

Focus: Energy

“With global geopolitical uncertainty energy security has been a big concern for the government. As India has limited fossil fuel reserves, the answer lies in alternate sources of energy. The government's focus on mega investments in manufacturing of solar photo voltaic cells, solar electric charging infrastructure and batteries as well as reduction in customs duty on import of all forms of uranium for generation of nuclear power would provide a major fillip to the Renewable Energy sector.“

Nilaya Varma, Partner and Leader Markets Enablement, KPMG in India

  •  “With the government focused on initiatives such as Bharatmala, Sagarmala and Udaan which are aimed on bridging rural urban divide and improving our transport infrastructure, infrastructure will get a major impetus. Restructuring of National Highways Programme will ensure creation of a national highways grid of desirable capacity.”
  • “The government has a clear focus on driving demand in rural India with a slew of schemes initiated to boost investment in the rural sector for upliftment the farmers
  • Reviving Investments -“Opening up FDI in aviation, insurance, media and animation sectors will pave the way for  reviving investments”.

Hitesh. D. Gajaria, Partner and Head of Tax, KPMG in India

Hon’ble Finance Minister Sitharaman’s maiden budget and policy statement is a sincere attempt to put India on the Growth Path to become a USD 5 Trillion Economy.


Key Policy Announcements include overhauling India’s antiquated and numerous labour laws and consolidating them into just four new codes, recapitalization of Public Sector Banks with INR 70,000 Crs in the current fiscal, thrust to the rural economy with ambitious plan increases to affordable housing, upgradation of roads and solid waste management, rebooting Public Private Partnership in Railways and other sub-sectors and an overarching amount of INR 100 Lakh Crores to be invested in Infrastructure Sectors over the next 5 years.


Direct Tax proposals did not see any material changes. Extension of lower Corporate Tax rate of 25% to companies with turnover up to INR 400 Crs, extending few sops to Start-ups and levying a sharply increased surcharge for those earning incomes in excess of INR 2 Crs and 5 Crs were highlights. There was however a clear push towards electronic interface between the Tax Department and the taxpayer, with even an electronic pre-filed Tax Return proposed by Govt. using the vast amounts of data at its disposal. On the Customs side, there was a slant towards protectionism, with rates seeing a hike for many commodities. There was also an announcement of a Scheme to resolve legacy disputes under the pre-GST regime.


Fiscally though the intent is to reduce the Fiscal Deficit to 3.3% of GDP, this is predicated on high disinvestment revenues and continued buoyant tax collections. The key to success will be diligent implementation of the good intentions

Sai Venkateshwaran, Partner and Head- CFO Advisory, KPMG in India

  1. Minimum public shareholding from 25% to 35%

Indian listed companies have always had a significant concentration of ownership in the hands of the promoters, unlike other global capital markets where the ownership is much more widely spread. 


The government’s proposal to explore increasing the threshold for minimum public shareholding from 25% to 35% is certainly a step in the right direction, but one that will need to be implemented in stages and timed with other measures to increase inflows towards capital markets. Further, before the government embarks on meeting the 35% threshold, it should take efforts to get all the listed PSUs to meet the current threshold of 25%. 


The move will certainly increase the depth in Indian capital markets and also provide greater liquidity to investors, while also helping with better price discovery.  The increase in institutional shareholding coupled with reduction in promoter shareholdings, could also have a positive impact on the standards of corporate governance in these companies. 


  1. CPSEs

The government’s proposals on enhancing public ownership and bringing greater commercial and market orientation of the listed PSUs is a much needed step, and in line with the recommendations of the Kotak Committee on Corporate Governance.  Currently, there is a significant market discount being placed on PSUs as compared to their private sector peers, due to the multiple and diverse objectives that these entities seek to serve in line with their broader social welfare objectives.  Bringing a commercial and market orientation and clarity on their objectives, including transparently stating any non-commercial objectives will allow investors to take informed decisions while investing in these companies. 


The government should also consider further divestment or future disinvestments only after bringing this commercial and market orientation, and also enhancing corporate governance standards, starting with full compliance of all SEBI listing regulations by these PSUs.  This can help reduce the discount on these stocks and help the government realise significantly greater value.


The government’s proposed realignment of the holdings in CSPEs should also take into account the Kotak Committee recommendation on setting up independent holding company structure under which all government holdings can be consolidated.  This can help provide greater independence and create a more autonomous environment for these PSUs to operate in. 


  1. Providing institutional access to capital for social welfare objectives – setting up of Social stock exchange

At a time when ESG investing and social impact investing are gaining prominence, the government’s efforts to providing an institutional platform for raising capital for social enterprises is a step in the right direction.  However, the ecosystem that supports this segment of the market needs to be developed, as this is still an emerging concept.  Further, the government will need to focus on investor education as well as put safeguards on the types of investors allowed to invest on these platforms, considering the risks and rewards could be very different as compared to other commercial enterprises.  Several of these enterprises may not necessarily be driven by profit or commercial motives; these could social impact investing to pure not for profit ventures. 


  1. Channelizing more savings towards financial assets – enabling retail investment in T-Bills and G-Secs

The government’s efforts towards attracting retail investments in treasury bills and government securities will help in its objective of channelizing more savings towards financial assets.  There is clearly an appetite for low risk investment options amongst certain classes of investors, and this will provide a good avenue for those investors as an alternative to other debt funds.