Budget 2015: FM needs to keep taxation sweet & simple to boost markets, says Deutsche Bank

In an interview to ET Now's Tanvir Gill, Sanjeev Sanyal, global strategist, Deutsche Bank, shares his views on the expectations global investors have with the forthcoming Budget.

Tanvir Gill: What are your broad expectations from the Budget? Can you tell us what would be the top three expectations and among them, what can make the event a hit for global market watchers?

Sanjeev Sanyal: There are several things that the forthcoming Budget can do, but we can start with simply presenting the Budget in a much more transparent way.

I keenly follow Budgets across the globe. Compared to many others, the Indian Budget looks opaque.

We can start of with getting out of the plan and non-plan expenditure format. It would be a big improvement. It would provide us better transparency.

The second important expectation would be a radical simplification of the tax system.

It is not just about how high the taxes are, it is also about how complicated these all are. It would be good, if the government goes ahead and simplifies taxes.

Of course, the GST issue is also there, but a much simplified tax system would widen the tax net. It will allow for a far greater efficiency and I believe this should be a key area of focus for the government. Reviving investment cycle should be another area of focus. This is not just about allocating more, but on how the allocations get implemented.

It is a matter of getting serious about government expenditure and making sure that some of these plans are actually put on the ground.

These are the broad areas that should be taken care of.

Tanvir Gill: Can you share with us the broader expectations and how fiscal policy will be supported with easing monetary policy? What are your expectations from the RBI post Budget?

Sanjeev Sanyal: Obviously, a lot of would depend inflation. Inflation is currently well under control. It is not just about the oil prices, non-oil inflation too has come off quite significantly. Even as food prices continue to be an area of concern, one has to be careful about using monetary policy to try and control food inflation. Real interest rates in India, I think, are among the highest in the world. There is lot of space for reducing interest rates from here on.

Tanvir Gill: What should be done on the revenues side? There are other key aspects like tax to GDP ratio and GST, what else?

Sanjeev Sanyal: Bringing more entities including corporates, requires a mindset where it is not about squeezing the existing people in the tax net, but expanding it. It requires incentivising the tax collecting authorities in a very different way than they have done in the past. You have got to have a very different approach to this — make it much friendlier environment for paying taxes.
As I said, a radical simplification would not just be good for those who are paying the taxes, but a simplified system is simply easier to impose and monitor.

Tanvir Gill: Sanjeev I will let you have the final word. The market has been re-rated with a 30-35 per cent return. The Nifty is on the verge of hitting 9,000. What would be the next big trigger for the market?

Sanjeev Sanyal: By and large, the macro conditions are improving and if policy momentum is continued and we will see the budget very shortly, there is an opportunity for a rating upgrade. It is surely a distinct possibility in the second half of this year.