“India is all set for an election” that’s what the Finance Minister’s Budget seems to suggest. This was one of the few or rather the one in recent memory where Agriculture, the Aam Admi or 60 per cent of India’s population, got its due, with a considerable time of Finance Minister’s speech focussing on them.
Farmers got various benefits from the Budget, the key amongst them being the wavier of farm default loans to the extent of Rs 60,000 crore topping the list. Apart from these, the Government has enhanced the allocation towards education, healthcare, sanitation and irrigation projects, which got a 20 per cent higher allocation.
Negative tint
On a normal course, the Budget would have been considered as a good Budget. However, excessive focus on agriculture and certain negative measures like increasing the short-term capital gains tax (increased from 10 per cent to 15 per cent) and lower than expected expenditure on infrastructure has given a negative tint from the markets perspective, more so when the industry and markets were not expecting anything negative from the same.
However, given that India is well placed in terms of the liquidity, which to some extent solves investment requirements, it was but natural for the Minister to oil the next engine of growth — the consumption boom.
If we consider the Rs 60,000 crore benefit provided to the farmers, the planned expenditure is up by a staggering 50 per cent. This coupled with the reduction in excise duty for two-wheelers and small cars, reduced from 16 per cent to 12 per cent, would help trigger consumption, which would aid growth.
This also to some extent solves the supply side issues stemming from agriculture. Thus, these measures would benefit agriculture related industries and auto. Amidst all this, the Government has stuck to its guns of fiscal prudence — reducing the revenue and fiscal deficit targets to 1 per cent and 2.5 per cent and maintaining the growth momentum of over 8 per cent.
Wrong precedent
Thus, overall, we rate the Budget as positive and one with human face; however, we believe it has set a wrong precedent for the future. This is considering the fact that the Government is already straddled with oil and fertiliser subsidies.
From the markets perspective, while the market might continue to be in the negative zone, we believe that investors should utilise the same to enhance their exposure in the markets as India continues to be on a growth path and liquidity would continue to chase Indian equities. The Budget would not act as a dampener on the stocks.
Farmers got various benefits from the Budget, the key amongst them being the wavier of farm default loans to the extent of Rs 60,000 crore topping the list. Apart from these, the Government has enhanced the allocation towards education, healthcare, sanitation and irrigation projects, which got a 20 per cent higher allocation.
Negative tint
On a normal course, the Budget would have been considered as a good Budget. However, excessive focus on agriculture and certain negative measures like increasing the short-term capital gains tax (increased from 10 per cent to 15 per cent) and lower than expected expenditure on infrastructure has given a negative tint from the markets perspective, more so when the industry and markets were not expecting anything negative from the same.
However, given that India is well placed in terms of the liquidity, which to some extent solves investment requirements, it was but natural for the Minister to oil the next engine of growth — the consumption boom.
If we consider the Rs 60,000 crore benefit provided to the farmers, the planned expenditure is up by a staggering 50 per cent. This coupled with the reduction in excise duty for two-wheelers and small cars, reduced from 16 per cent to 12 per cent, would help trigger consumption, which would aid growth.
This also to some extent solves the supply side issues stemming from agriculture. Thus, these measures would benefit agriculture related industries and auto. Amidst all this, the Government has stuck to its guns of fiscal prudence — reducing the revenue and fiscal deficit targets to 1 per cent and 2.5 per cent and maintaining the growth momentum of over 8 per cent.
Wrong precedent
Thus, overall, we rate the Budget as positive and one with human face; however, we believe it has set a wrong precedent for the future. This is considering the fact that the Government is already straddled with oil and fertiliser subsidies.
From the markets perspective, while the market might continue to be in the negative zone, we believe that investors should utilise the same to enhance their exposure in the markets as India continues to be on a growth path and liquidity would continue to chase Indian equities. The Budget would not act as a dampener on the stocks.
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