'Remove sectoral restrictions on foreign venture capital, private equity'

Rajesh Srivastava, Chairman & Managing Director, Rabo Equity Advisors, says the budget should ease restrictions on foreign venture capital and private equity to stimulate more inflows. 

Given the current challenges, what, in your opinion, would make for a good budget? What measures or proposals would you like to see?
I would like to see the Budget deliver on the following critical issues that impact my business:

• Remove or amend all clauses that could enable the taxman to resort to retrospective taxation, as it would stimulate foreign flows
• Remove all sectoral restrictions on foreign venture capital/private equity in CBDT, SEBI and RBI regulations
• Ensure that FEMA/RBI is fully aligned with the government's (DIPP) guidelines on instruments of foreign direct investment (eg: convertible shares linked to a formula for conversion)
• Clearly define the tax exemption provisions on R&D and extension services in agriculture as they are very differently interpreted by different taxmen.

 
Given the constraints the government faces in raising revenue, do you see a case to increase income tax rates on the rich?
I would consider it more appropriate for the tax base to be expanded rather than simply increasing the rate of tax on one class of people. There are enough loopholes currently being exploited that can be plugged to improve the tax base. Attaching any definition to "rich" for this purpose may not be appropriate.

If the budget does not meet expectations, do you fear that business sentiment would once again dip?
In principle, it will be true. However, it all depends on the balance struck between immediate and long-term goals. Markets have a very good eye for more sustainable and long-term reforms and hence could well monetise them post budget. I have no reason to doubt the ingenuity and competence of the finance minister to pave the way for sustainable reforms. Like many times before, he will probably pull it off well, even if scraping the bottom in a few cases (such as fiscal deficit). I would give a very fair chance that markets will be boosted after this budget.
 
Specific to your sector, what could the current budget do to improve conditions?
The budget could be helpful to food and agriculture in many ways:
 

• By rationalising indirect tax rates on various agricultural activities listed by nature rather than size
• By rationalising bank interest rates and sectoral obligations by activities or sectors rather than the amount of loans
• By rationalising public distribution systems
• By opening public private partnerships in agricultural infrastructure, such as in irrigation

 
Which budget, in the recent past, do you remember as having been a good one?
I would rate the budget of 2008/09 as a good one as it impressed me with its depth and analysis of the economy and its various sectors. And the calibrated approach to improving the sectors.