With its GDP having grown steadfastly at an average of 7.4% over FY2014-2019, India’s economy was facing a growth hurdle owing to three primary challenges. First, a lack of consumer demand due to inadequate liquidity, second, lack of adequate investments, and third, a rather subdued mood due to burdensome compliances and low economic growth. To set a positive tone for Prime Minister Modi’s second term, this was an important budget and the FM has tried to tackle each of these issues and move the needle.

The reduction in tax rates for personal income tax, despite being optional, will go a long way towards getting money back into people’s hands by forgoing direct taxes of Rs 40,000 cr. This, along with an outlay of `20,000 crore through the removal of the Dividend Distribution Tax, will bring about Rs 60,000 crore of relief to the masses. A valiant step to boost investments came from increasing the fiscal deficit by 0.5% for FY20 and FY21. By increasing the fiscal deficit, the FM opted for special provisions under the FRBM Act.

Granting 100% exemption for sovereign wealth funds in infrastructure was a necessary move as getting these large pools of long-term money to enter India was riddled with complicated tax hassles, and not the tax rate itself. Further, increasing the FPI limit in corporate bonds to 15% will play a crucial role in deepening the bond market.

Increased allocations for agriculture and in the social sector are a positive sign for the government’s continued commitment to the growth of these sectors. It was good to see the government starting conversations around the application of technologies like AI beyond start-ups, like in the national policy for statistics and the Ayushman Bharat scheme.

As far as technology and start-ups are concerned, the Budget has been disappointing. While measures like setting up of the early-stage fund, investment clearance and advisory cell, fibre connectivity project BharatNet, the `8,000-crore outlay for quantum technology, and providing tax rebates and extensions show the emphasis laid out by the government towards this sector, the alleviation of more pressing concerns was amiss.

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The start-up sector had three major expectations, one was the resolution of the ESOP issue to create wealth for the builders of high-growth companies. This has been brought to the attention of the FM but has only been paid hasty attention. The second concern was the tax parity on capital gains. Capital gains for foreign investors and on public market exits are taxed at 10%, whereas high-risk tolerating early-stage Indian investors are taxed at an uncompetitive rate of 28%. The third ask from the community was the reduction of TDS for start-ups. Most of these companies face losses in the first few years, with much-needed capital getting blocked with the government through TDS. With entrepreneurship and start-ups being a high-growth and high-priority sector, the finance minister should have paid closer attention to the requisites of the start-up ecosystem. However, none of these asks were met. Very disappointing.

All in all, this is a good Budget keeping in mind the pressing economic needs of the country. However, it could have been bolder.

The writer is Chairman, Aarin Capital Partners