The key takeaway from the Budget is that it gives a sense of stability, removes uncertainty, and could drive the growth and the overall sentiment of the large consuming population.
The Interim Budget of the government has touched upon most of the things that are covered in a regular budget. It attempts to take care of the real need of the country at this point of time which is to further revive the overall economy. The Budget has tried to address the needs of the large population of India: be it farmers, salaried people, pensioners or the unorganised sector.
Recognising the stress that some in the farming sector go through, the government unveiled the PM Kisaan Samman Nidhi, a relief of an assured income of Rs 6,000 a year for a farmer owning up to 2 hectares of land.
While there was no change in the income tax slabs, the government did take into account the large lower middle income class group and announced a relief of no tax for an income of up to Rs 5 lakh as well as a revision in the standard deduction for the salaried class to Rs 50,000. The Budget also brings 42 crore of workers in the unorganised sector into the pension fold adding an additional cover of security for the future. All these are positives for a wide cross section of people who ultimately drive India’s growth engine.
This is a growth-oriented Budget in terms of giving more money in the hands of the people. With the likely potential savings due to the change in the tax applicability, there would be more money in the hands of common people, thus increasing their purchasing power. What it does in turn is to boost consumption. Higher consumption will create an ecosystem of growth, positively impacting multiple segments.
Higher demand will inch up the manufacturing and allied sectors segment, thereby resulting in higher GST collection, reducing fiscal deficit and ultimately improving the GDP growth rate. This additional savings in tax also gives the elbow room to channelise it towards long term investment tools such as SIP.
Naturally with more money in hand, people can actually come back to a buying mode. I am sure with these potential savings, many industries such as the two-wheeler and the hatchback car sales, which has seen a declining trend in the last few months, would revive. Also the capital gains exemption under Section 54 to be available on two house properties is a much-needed boost to the real estate sector which can provide employment as well as increase the demand for basic materials such as cement, steel etc.
Overall, the Budget has addressed the needs of people at large and has kept in mind the seriousness of managing the fiscal deficit to 3.4 percent, a small increase for the targeted number. For example, the Kisaan scheme of Rs 6000 per month for an approximate 12 crore farmers comes to an aggregate of 72,000 crore, which is pretty much exactly the same amount allocated.
The key takeaway from the Budget is that it gives a sense of stability, removes uncertainty, and could drive the growth and the overall sentiment of the large consuming population. It also provides a vision for India and could renew the confidence of foreign investors who have all through believed in India’s long-term growth story.A Balasubramanian is CEO, Aditya Birla Sun Life AMC Limited. Views are personal.
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