FM could have done lot more in Budget 2011: Mr. Kanu Doshi   Mar 10, 2011


PersonalFN is privileged to bring to you Mr. Kanu Doshi, Partner with Kanu Doshi Associates, Chartered Accountants and Dean (Finance) at Welingkar Institute of Management Development & Research


In an interview with


Quantum Information Services Pvt Ltd (PersonalFN)


Mr. Doshi shares his view on Budget 2011-12.



  1. PersonalFN: On a personal front are you satisfied with the Budget 2011-12; and what do you think are the positives of this Budget?

    Mr. Doshi: Overall, I am not satisfied with the budget. – FM (Finance Minster) could have done lot more than what he has done. Considering the turbulent times - because we are not still out of the woods, India is still under the adverse effects of whatever wrong has happened financially globally. Therefore, he could have done a few bolder things on direct tax front, and on indirect tax front, as well as on general allocation of funds for giving a real boost to the Indian economy. So, he has virtually treated the budget for the year 2011 – 2012 as a normal year, while all of us in this country are convinced that it’s not a normal year. Therefore, he should have done something bold, something far more than what he has done. So this first reaction.

    On the personal tax front he has given very token reliefs and we welcome them howsoever little. Thus basic exemption for general category of tax payers (and not women or senior citizen) is raised, from 1.60 lakh to 1.80 lakh. For women it is retained at 1.90 lakh and for senior citizen it is raised from 2.40 lakh to 2.50 lakh. FM has brought in this year a new “Very Senior Citizen” category at 5.00 lakh for 80 years & above. Yet another good thing that he has done is age of 65 has been brought down to 60 (for being classified as senior citizen). Representations from several organisations for fixing uniform age of 60 applicable to senior citizens have helped, and this would benefit substantially people who are now retiring at the age of 60. But for being eligible one has to have completed 60 (year f age) or 80 by the last day of the accounting year ending 31st March 2012.

  2. PersonalFN: So, do you think the Budget 2011-2012 is really populist in a way?

    Mr. Doshi: In a way I would strongly say yes. But these very senior citizens somewhere I read, who are having income upto 5.00 lakh and above or around 5.00 lakh, is just 5,000 in number. But nonetheless he has made a wonderful gesture, but (reducing the age for someone to be classified as senior citizen) 65 years to 60 would benefit substantial portion of the population - substantial portion!

    And with the revenue loss on that front, will no doubt be tolerably good. That’s why he (Mr. Mukherjee) has worked out 11,500 crore as revenue loss on the direct tax front, and he will make up 11,300 crore by the way of service tax and bit of excise. He has widened the scope of few services.

  3. PersonalFN: : But in a situation where we already facing inflationary pressures, people are feeling a pinch on their pocket – do you think it was a valid move to increase service tax especially on air travel and healthcare, where centrally air-conditioned hospitals having beds over 25 in number, will be subject to a service tax now?

    Mr. Doshi: What you are saying is right, and there’s serious re- thinking on the imposition of service tax on the healthcare segment. It may be rolled back.

    Coming back to increase in service tax on travel, I believe that (FM) has been selective. On travel, he has increased the business class air travel, but not railway travel. A person who travels by air is better placed than a person who travels by rail- that’s (FM’s) logic. And don’t forget that the Government does need revenue, so this was one source (viz. service tax) which he thought it fit to tap. But despite the increase, people will continue to travel by air. If petrol prices are any guide, any increase in petrol prices has not reduced our traffic jams caused by cars and more cars. They continue to be as bad as ever.

  4. PersonalFN: The Government has kept that into mind – they have not really tinkered much on the import duty of oil.

    Mr. Doshi: Yes, on the ground that it was already very volatile. Turmoil in Lybia is worrying and any increase over $110 will hurt our economy.

  5. PersonalFN: Earlier, you mentioned about the negative of this budget also. Any other thing which you think the Government has still left in loop holes, in terms of the negatives for the budget 2011-12. Loop holes which are not been addressed to at all till date by any of the budgets so far – it may be on the infrastructure front, power problems in rural areas, education. You think allocations could have gone up in some sectors?

    Mr. Doshi: Education – so dear to my heart because I make a living out of serving that sector; could have been provided a much larger financial support. FM has made allocations to few select institutions - 21 crore to IITs, etc, so only that. Shouldn’t he have given support across the board? By all means, do impose certain restrictions – meaning educational institutions must be AICTE approved. But look at the irony. On one hand you say ‘’demographic dividend’’ is itself a challenge but you have done nothing much in that direction. Demography at the moment is in our favour, but if you neglect to look after educating them and preparing them for gainful jobs, you may face a giant problem.

  6. PersonalFN: Sir, similarly on the economic front, do you think that the allocation towards infrastructure, education, creating employment opportunities in rural areas – giving them more benefit; would help us achieve 9.0% growth projected (within a range +/- 0.25%), and would they come to that target of 4.6% for 2011-12?

    Mr. Doshi: While that several people – and you are not the only one to express cynicism on the 9.0% GDP growth rate, I am extremely bullish and optimistic that if this Finance Minister believes that 9.0% can be achieved, he will achieve it – not that he has any magic wand, but we all know that all these GDP numbers do not fully capture the “black economy”. So, it was Mr. K.V. Kamath of ICICI Bank Ltd. for the first time publicly said that if our GDP is 8.5% - actually it is 12.5%. So that’s why I believe 9.0% is achievable for the coming years.

    What is significant is that the FM has in a retained the figure of 40,000 crore for PSU disinvestment proceeds. And now he will have to keep capital market & economy buoyant.

    When DTC first came in 2009 under Mr. Chidambaram, he had taken away the exemption for equity shares and he had also recommended EET (Exempt Exempt Taxation) for savings. In 2010, Mr. Mukherjee took over and he removed that team altogether and restored the exemption for long-term capital gains on listed equity shares. Similarly, he has also retained the EEE (Exempt Exempt Exempt) status. The point I’m trying to say is (FM) is a much wiser man now, but for achieving the 9.0% growth, he has to be very industry friendly and investor friendly.

  7. PersonalFN: Coming back on the DTC point, do you think with the new team which has taken over ever since Mr. Mukherjee has come in, do you think the DTC will take its right form? Because there has been some lobbying taking place for example the insurance industry has been favoured by giving an exemption under Section 80C, while ELSS will be withdrawn now i.e. it will not form a part of section 80C. So in this context do you think the DTC will take it right form, and ELSS would be restored in section 80C?

    Mr. Doshi: Yes, the two examples you have citied are very correct. But knowing the mutual fund industry, it is not unduly dependent on ELSS. You’ll be amazed to know the quantum of money - small quantum of money is coming in ELSS. So the industry is not much worried on ELSS going away in DTC, because, the industry is aware that major part of 80C (investment) goes in only two instruments – Life insurance premium and PPF (Public Provident Fund). So, the entire quota of 1lakh (maximum deduction available under section 80C) is taken up by these two (investments).

  8. PersonalFN: The Finance Minister has done a very smart thing by allowing foreign investors to invest in equity mutual funds in India. Do you thing that was right move in favour of the mutual fund industry which is suffering in terms garnering more AUM, after the entry loads were banned?

    Mr. Doshi: It’s the nicest thing to have happened. Mutual funds are extremely happy and they are looking forward to tapping this money from the non-residents and foreigners. Of course some doubts are raised with respect to KYC. Now how to expect some Mr. John Smith in Chicago, U.S.A to obtain a PAN (Permanent Account Number) in India, because PAN is one of the items for KYC. But when it comes to nuts and bolts, SEBI would be told that – if Bill Gates invests money he has his social security card in U.S.A, which serves as a KYC in USA. So we should accept that.

  9. PersonalFN: Sir, by getting in foreign investors to invest in India – just like FIIs who push in and pull out money which brings in immense volatility in the markets; do you think volatility will be infused with foreign investors investing in India?

    Mr. Doshi: We have received U.S. $ 30 billion, from FII and our index has gone to very healthy at – about 18000 plus (level). When they (FIIs) come in, the market goes up by 15%, and when they pull out even U.S. $ 2 billion, market falls by 15% - so we are getting good stocks cheap by 15%. So this is the answer to that point of volatility - that yes it will lead to volatility. But only FIIs are causing this; here individuals – one say Mr. John Smith is going to invest. Mr. John Smith by himself may not be that volatile.

  10. PersonalFN: Sir just the final question. On a scale of 1 to 10 (10 being the highest), how would you rate the budget?

    Mr. Doshi: I would give it a 5 on 10. The reason is he could have done much better. May be he had his constraint of assembly elections in five important states.

    PersonalFN: Thank you so much Sir, for your precious time and insights.


Add Comments

Financial News. Simplified


Knowledge Center


Money Simplified Guides (FREE)


Mutual Fund Fact Sheets


Tools & Calculators