The budget announcement was expected to be a perfunctory statement except that it had to address a few constituencies considering the upcoming general elections.
Having said so, the budget did announce quite a few initiatives such as covering 12 crore farm families with an income transfer of Rs 6,000 per year and launching a pension scheme for an estimated 42 cr unorganised workers and laborers.
I would look forward to understanding the nuances of the pension scheme and its execution and how it can increase investments in the economy, especially in capital markets. Further, a full rebate on income tax for people earning upto Rs 5 lakh is a welcome move.
The income transfers and the tax rebates would reward some of the deserving sections of society and might have an effect of enabling consumption especially in the FMCG, white goods and two-wheeler segments. The limit for applicability of TDS on interest from fixed deposits was moved from Rs 10,000 to Rs 40,000.
This will not only result in more convenience it could also help save unwarranted tax loss for the elderly and others who don’t have any income or don’t file returns otherwise.
All in all, markets like continuity when elections come up and in any case support to rural and agri based segments of the economy is the economic need of the hour.
Well targeted, well intentioned social initiatives which put more money into the hands of people must be appreciated, especially considering this government has a reasonably good track record on corruption-free execution.
That apart the relief on certain parameters of real estate sector was welcome too. Extension of capital gains benefits to purchase of two properties instead of one, tax benefits on second self-occupied property, increasing limit of TDS applicability on rent are all welcome sources of relief for a struggling real estate sector.
While the GST discussion doesn’t fall under the ambit of the budget announcements, there was almost a tacit confirmation of reduction in GST for the real estate sector. This will provide further relief to a sector that is one of the largest generators of formal and informal employment in the economy.
Considering the upcoming political events, not much was expected from the budget. But, seeing that there were some milestone pronouncements made anyway, what I didn’t like is that the entire industrial spectrum, the need for capital expenditure, industrial growth, job creation, the prohibitive levels of taxation on equities by way of Securities Transaction Tax (STT), Long Term Capital Gains (LTCG) and dividend tax; all of these burning issues were totally ignored.
They could have been addressed, especially the heavy taxation dealing with equities because the government does have a heavy disinvestment target for this year and the next and market buoyancy is crucial.
But this year we are going to have two budget festivals, and today’s announcements are in today’s context so I look forward to the next one maybe in July 2019.
Aashish P Somaiyaa is CEO of Motilal Oswal Asset Management Company Limited.
First Published: IST