This budget is no shock and awe affair: Anand

The Finance minister presented a balanced, no surprises budget that is committed to growth. We expect the budget to have a positive influence on mutual funds, capital markets and the economy at large. The budget is also expected to help maintain the confidence of both domestic and foreign investors.

The budget has set its focus clearly on the infrastructure sector. It aims to create an environment that balances of the role of private sector with that of the public sector for greater effect. The focus on primary infrastructure in terms of health care and rural economy is especially heartening to note.

The balancing act of the budget comes about from the fact that while it aims to spend meaningfully in critical areas like infrastructure etc, it also squares up well with fiscal discipline. The fiscal deficit to GDP ratio is estimated at 3.8 for 2006-07. This is a very healthy development and a highly critical one at that especially for growth. As the economy keeps growing the demand for resources would increase commensurately. The government has ensured that by keeping the fiscal in check, it would not crowd-out the legitimate demands of the corporate sector. This would keep interest rates under check even though we expect the underlying direction to be upward.  We expect the current growth momentum that is driven by strong consumption and nascent investment spending to sustain.

It is satisfactory to note that the taxation aspects for mutual funds have remained unchanged. Maintenance of tax concessions is essential to give a boost to this sunrise industry so that there is greater penetration into the retail markets. In this context the budget has extended the concessions regarding exemption from dividend distribution tax to close-ended equity funds as well thereby bringing it on par with open-ended equity funds.

The author is Rajiv Anand, Head Investments, Standard Chartered Mutual Fund.

Also read -

• Important Budget announcements for Mutual Funds
• Budget '06 - Mutual Fund Wish list
• No derailing of growth momentum: Rajiv Anand