Don't need Budget 2013 to resuscitate contribution cycle: Kotak

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Sanjeev Prasad Sr ED Kotak Institutional Equities
F
inance minister P Chidambaram's Union Budget 2013-14 has garnered mixed reactions from market and India Inc. Sanjeev Prasad, ED & Co Head, Kotak Institutional Equities told CNBC-TV18 that the steps in Budget were necessary, but not sufficient.

Prasad does not see revival in investment cycle from measures announced Budget alone. "You require more follow on steps if you need to revive investment cycle. For that you still require a lot of clarity on land acquisition process, resource allocation process, approval process, all those things need to be put in place if you need to revive investment cycle," he adds.

Below is the verbatim transcript of Sanjeev Prasad's interview on CNBC-TV18

Q: What is your view on the foreign institutional investor (FII) investment routed through Mauritius? Do you think there has been enough clarity overnight to suit the investors?

A: I assume some clarity will come. So far we haven’t seen anything, but given that India requires large amounts of capital flows in various forms whether it is FII equity, FII debt, external commercial borrowing, we require that given a very high current account deficit leading to some clarity. So far, there is a fair amount of confusion as to the applicability of section 90 (A).

As far as the tax residency certificate (TRC) is concerned, one needs to know its role for some of the FIIs which are operating out of tax free jurisdiction such as Mauritius. Whether the income tax authorities will have the authority to look at some of these transactions which are being outright through Mauritius and whether they could potentially come under the tax net. Let us hope for some quick clarification.

Q: Has FM done anything to address the problem of the investment cycle which is our core problem? Did you come away disappointed on that front?

A: Yes. Necessary, but not sufficient that applies to the investment side also. There were some steps which were taken but I don't think they were sufficient enough to excite the investors whether it is entrepreneurs or FIIs or who so ever looking at India more favourably as an investment destination. The only real thing which has happened as far as investment is concerned is the investment allowance issue which a lot of companies would anyway have in other tax benefits. Many of these companies would anyway be under map because of commissioning of new plant.

It is not as if the investment cycle is going to change dramatically based on the announcements which came in the Budget. You require more follow on steps if you need to revive investment cycle and for that you still require a lot of clarity on land acquisition process, resource allocation process, approval process, all those things need to be put in place if you need to revive investment cycle.

The big challenge for India is to do some reforms over the next six-eight months and then again go into slumber as far as reforms are concerned. This start and stop process will not be good for investors who want to take a call on investing money into India whether it is portfolio guys or industrialists, entrepreneurs.

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