Common Man, Market Punter Both Can Cheer
To list well-performing PSUs will raise resources for the govt EXPERT TAKE
SMALL AND Medium Enterprises (SMEs) and middleclass individuals form the core of the economy. There are tax breaks for SMEs and also concessions for middle-class people who are tax payers in the lower and middle slabs of income. Our growing working class, farmers and urban workers need housing, jobs and better infrastructure.
There is a planned increase in capital expenditure by 25%, which will be a huge boost for economic growth and employment. Spending on capital rather than revenue expenditure creates or expands capacity to sustain long-term growth as well. The Budget has major incentives for affordable housing, including infrastructure status to the sector, and increase in area threshold for housing units. This will spur investm1ent in the sector. If we go by the experience of the US and China, there has been a strong correlation between the housing sect o r a n d e c o n o mi c g r o wt h . Investment in housing spurs employment and has a cascading impact on demand for input sectors.
Stock market investors were concerned. They are now pleasantly surprised. The bulls have several reasons to rejoice. There is no change in tax structure on capital gains, or gift tax, or estate duty. For institutional investors, fiscal prudence and containing the deficit at 3.2% are positives.
The government’s plan to list a few well-performing PSUs such as IRCTC, IRFC and IRCON will raise resources for the government and offer good quality securities to new money in the market. Lower government borrowings at ₹ 3.5 lakh crore will drive interest rates down, a reason for corporate sector to be happy and individuals to allocate more assets to equities. Foreign investors are relieved with1 the annulment of the controversial CBDT circular.
The planned dismantling of FIPB is another big reform step to support growing foreign direct investment in India. While the Budget has a few positives and no negatives for the market, the liquidity situation is extremely benign. Domestic mutual funds have witnessed unprecedented flow of money, a large part into equities, post-demonetisation, a trend that is likely to continue with lower bank deposit rates and an improving outlook for corporate earnings. Also, the US dollar index is showing weakness, causing increased flow of funds to emerging markets. FPIs have already turned net buyers in India.
A rare Budget that delights both common man and market punter.