Budget 2018: Considering the amount of fiscal pressure that the government is burdened with, Budget 2018 may not turn out to be populist in nature. In fact, it will be more towards rationalisation of spending to accommodate higher social expenditure, says market analyst Asif Iqbal. Finance Minister Arun Jaitley may also look towards relaxing income tax slabs in order to boost disposable income in the hands of the common man of the country in Budget 2018. “We don’t expect populist budget. It is will be more of rationalisation of spending and re-distribution of spending to accommodate higher social expenditure. Looking at the fiscal pressure we do not expect Finance Minister Arun Jaitley to decrease corporate tax. Some relaxation in income tax slab could be done to boost higher disposable income,” Asif Iqbal, Research Head (Equities), Escorts Securities tells FE Online in an interview.
In Budget 2018, Finance Minister Arun Jaitley may give a much-needed boost to sectors such as infra, construction, auto, consumer goods, and real estate. The rural sector may also receive higher focus through increased outlay in Budget 2018 towards NREGA, housing and roads, he added.
Here are the edited excerpts of Asif Iqbal’s interview with Ashish Pandey of FE Online:
Q1. What are your expectations from the Budget 2018?
Focus areas in Budget 2018 will be:
a) Rural spending as a percentage of GDP has come down below 1% from 1.4% in last 5 years. We could see a boost in rural spending. Push to NREGA, Rural Road, Rural Housing.
b) Infra: Infra boost could be seen through off-budget sources as NHAI, Railways.
c) PSU Bank: Details Bank Recapitalisation Programme and beneficiaries.
d) Construction: Increase in outlay for roads and railways sector.
e) Consumer Goods: Rural Initiatives on higher income generation.
f) Real Estate: Increase in exemption limit for interest on the home loan in Budget 2018 from current Rs 2 lakh.
g) Auto: Expects rationalization of the GST tax rate on electric vehicles.
h) Steel/Cement: Boost to the low-cost housing to drive steel and cement demand in Budget 2018.
We are neutral on Oil & Gas, Hotel, Telecom, Media, IT sectors.
Q2. What will be the key areas of focus in Budget 2018?
On the macro front we would be watching the following issues:
a)How would wide divergence be from fiscal consolidation? What would be the fiscal deficit target?
b)What will the government do to generate employment?
c)Especially after Gujarat Elections, it is necessary to see will government increases social and rural spending in Budget 2018. If they increase then how they would be financing it.
It is to be seen how Finance Minister Arun Jaitley balances between fiscal consolidation and growth in Budget 2018.
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Q3. Will Modi govt bring back LTCG tax on equity returns in Budget 2018?
We expect a change in holding period for LTCG. At present it is 1 year, this could be increased. Tinkering with LTCG could see market reacting adversely. Though buying could emerge at the lower level due to higher liquidity.
Q4. Do you see the Budget 2018 making dividends taxable in the hands of the receivers instead of being taxed at source via Dividend Distribution Tax (DDT)?
I don’t think Budget 2018 will touch DDT. As promoters are now more seen doing buyback rather than giving a hefty dividend. As dividend above Rs 10 lakh is taxable.
Q5. What’s your take on cryptocurrency? Will government clarify tax treatment on Bitcoin in Budget 2018?
No view. This is more hype. It does not fulfill the requirement of money. It is just speculative bet.
Can Bitcoin be used as Medium of exchange freel?. I don’t think so. Can Bitcoin serve as a store of value? This is not true in this case as there is wide volatility. We feel Finance Minister Arun Jaitley should leave Bitcoin in Budget 2018. It will die its own death or we see some form of more organised, regularised stable currency in the coming decade.
Q6. How do you see the markets behaving this year? What are your levels for Nifty, Sensex this year?
We expect big volatility in the market in 2018. The second half of 2018 will be more volatile as we approaching State Elections in Rajasthan, MP and Chattisgarh. Which is crucial for BJP and precursor to Lok Sabha Election in 2019. It is more of traders market rather than investors market.