Some disappointments but aligns well with expectations

Vinit Sambre of DSP Mutual Fund

The latest budget aligns well with expectations, particularly regarding fiscal discipline. The budget's fiscal deficit target of 4.9 percent is better than anticipated. I believe it can create a positive environment for the country. Additionally, the government has committed to reducing the debt-to-GDP ratio, which indicates a strong financial outlook, which bodes well for the interest rate environment and overall economic health.

Another standout announcement is the maintained capital expenditure (capex) growth of 17 percent over the previous year. With an allocation of Rs 11 lakh crore, the budget ensures the continuity of capex momentum. This commitment is crucial as it reflects the government's intent to utilize its resources effectively.

Moreover, the RBI dividend has been strategically used to fund initiatives focused on employment generation and rural development. The budget allocates higher amounts for the benefit of farmers and the rural population, which is expected to boost consumption and take care of investment outlooks.

In terms of taxation, the budget offers some relief, especially for lower-income groups. For instance, individuals earning up to Rs 15 lakhs will benefit from an increased tax rebate of Rs 17,500. This move is expected to positively impact lower consumption items.

However, there are some drawbacks and disappointments. Changes to long-term and short-term capital gains taxes, may have a slightly negative impact on the capital market. The removal of indexation benefits on long term gains from the real estate transactions is also seen as a marginally negative change for the real estate sector.

The market also had expectations around options and F&O trade, but they have increased the STT. This could perhaps be because SEBI has formed a committee to look at this and there may be more announcements from SEBI beyond what has happened in the budget.

The budget also addressed the states of Bihar and Andhra Pradesh. This I believe demonstrates a collaborative approach with state governments and reinforces confidence in the government's partnership model.

The budget's approach to the oil and gas sector, particularly the lack of LPG subsidies, has been met with some disappointment. However, these are considered minor nuances in an otherwise fiscally disciplined budget.
This could be as a part of the government's long term goals of "Viksit Bharat" with initiatives in employment, rural development, skill training, and more. These efforts will marginally add to consumption with the benefits they provide, such as stipends for first-time job holders.

When you add up these pieces, they should bring benefits. While not everything was addressed, and it could have been better, the proposals combined with changing monsoon patterns affecting income levels should overall be fine.

Vinit Sambre is head of equities at DSP Mutual Fund.