Domestic mutual fund industry has reason to cheer: Sinha

This year's budget is clearly oriented towards achieving a GDP growth rate of 8% or above.What is equally commendable is the emphasis on all three drivers of the economy - services, manufacturing and agriculture, to achieve this growth target.The focus on agricultural credit off-take, power and infrastructure all underscore the broad-based and inclusive nature of economic growth, encompassing all segments of our society; that is being envisaged by the Union Government through this budget.

Increasing the gross budgetary support by 20% for planned expenditure in its eight flagship programmes, announcing a timeline for initiating work on five mega power projects,and providing viability gap funding in PPP projects through the formation of Indian Infrastructure Finance Limited, all augur well for the economy in the coming year.

Not only has the budget been successful in meeting its growth mandate, but also in demonstrating its commitment towards fiscal responsibility. By reducing the fiscal deficit to 4.1% of GDP for FY05-06 and projecting a fiscal deficit of 3.8% for FY06-07 the government has successfully addressed concerns regarding the state of its financials.

The domestic mutual fund industry has reason to cheer with the removal of 10% reciprocal shareholding for investments in overseas instruments and exchange traded funds, as this will help the industry participate in global growth opportunities. The last 12 months has shown that the Indian mutual Fund industry come of age and a foray into overseas investment is a logical extension. Extending tax exemption for dividends declared by close ended funds is also a positive.

The author is Sanjay Sinha, Head - Equity, SBI Mutual Fund.

Also read -

• Important Budget announcements for Mutual Funds
• Budget '06 - Mutual Fund Wish list
• Extend zero dividend tax to equity close-ended funds: AMFI