The reforms, largely focused on benefitting the rural and middle-class taxpayers, have struck the right cords with market watchers, investors and the public at large.
Interim Finance Minister Piyush Goyal didn't restrict his maiden Budget address to an interim one but has clearly laid out a roadmap signaling significant economic growth over the next 8-10 years.
The reforms, largely focused on benefitting the rural and middle-class taxpayers have struck the right cords with market watchers, investors and the public at large.
The clear winner in this Budget is the consumption sector. Enhanced subsidies and cash benefits to farmers, pension schemes for the unorganized workforce and a significant tax rebate for people who have incomes up to Rs 5 lakh, an increase in standard deduction in the income from the salaried class, have clearly put more money in the hands of the retail consumer.
We can expect demand in the consumption-driven sectors of Auto, FMCG, Building Materials, and Insurance to increase rapidly.
However, one must vary that increased spending would lead to higher inflation levels, which could indicate that the Reserve Bank of India (RBI) may hold back reducing interest rates in the near future.
SME & MSME Sector:
Another major beneficiary is the SME & MSME sector. A 2 percent interest subvention for loans up to Rs 1 crore along with the share of government procurements being done through MSMEs increased to 25 percent will provide a major fillip to the growth of this sector both in terms of business expansion as well as job creation.
Real Estate Sector:
The real estate sector, which has faced headwinds since sometime now too saw a silver lining. Affordable housing, received a significant impetus as the projects registered up to 2020 received a tax exemption.
This one-year exemption would benefit new projects. Additionally, the benefit of exemption on capital gains up to Rs 2 crore for investments in two houses would promote reinvestment in the property.
The removal of 3 PSU banks from PCA framework and a capital infusion of Rs 2.6 lakh crores to PSU Banks signals green shoots for the debt-laden banks.
PSU banks can reinvigorate their lending activities. However, they need to inculcate stringent norms for keeping their NPA levels under check.
To sum up, the government has sought to draw a balance between fiscal discipline and welfare announcements. The increase in the target fiscal deficit is only marginal but extremely well justified.
The growth in tax revenues and the taxpayer base is an exceptional sign. On a scale of 1 to 5, where 5 is the highest, I would rate the budget at 3.5.
The author is Executive Chairman, Centrum Group.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.