In the words of the finance minister, “India has emerged as a bright spot in the world”, and rightly so. The Budget proposals seem to be taking the ‘Sabka saath, sabka vikas’ agenda of the present government forward. In my view, the FM seems to have done a balancing act with necessary tradeoffs which will have a positive impact on the economy as a whole.
Some key positives include, maintaining the fiscal deficit target at 3.2% which is fairly good, achievable and will have a positive impact on the Bond market. The government seems to have continued on the path of fiscal consolidation, without compromising on public investments. Budget also focuses on enhancing expenditure in priority sectors which are the backbone of the Indian economy i.e. farm sector, social sector and infrastructure sector by making a fair Budget allocation.
Reduction of corporate income tax rate for MSMEs is a very positive step and will boost the corporate earnings for the MSME sector. The changes proposed in the Budget around the real estate sector, affordable housing, tweaking of LTCG on immovable properties, coupled with the reduced interest rates due to demonetisation are amongst the extreme positive takeaways that will lead to a consumption led growth in the next fiscal. The changes will boost the real estate sector, increase employment, boost demands and the supply.
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One must appreciate the qualitative changes that the finance minster seeks to bring about. Changes proposed to bring in transparency in the political funding by reducing the limit, abolition of FIPB (one needs to await for the transition plan), streamlining of the administrative and other processes.
With all the changes proposed in the Budget, the government is likely to continue with the ongoing reforms such as effective implementation of the Goods and Service Tax bill and Insolvency and Bankruptcy law.
By Rashesh Shah, Chairman & CEO, Edelweiss Group