Due to political compulsions, path-breaking reforms weren’t expected. However, some industry captains had hoped for big-bang announcements. In that, it disappoints. Not many had believed the 4.5 per cent fiscal deficit targets last year, while the final number of 5.9 per cent is worse. There is more credibility to the 5.1 per cent number for FY13 and directionally the move to cap subsidies at two per cent of GDP is positive. One expects the government to raise fuel prices.
There has been some relief on direct taxes, with savings of Rs 22,000 for tax payers in the Rs 10 lakh-plus tax bracket. However, the increase of service tax from 10 to 12 per cent and increase in the list of services would neutralise any savings from personal taxes. From an HNI perspective, one of the measures aimed at bolstering the infra sector issuances of tax-free bonds from Rs 30,000 crore to Rs 60,000 crore.
To summarise, it could be called a pragmatic Budget. Markets would not attach much significance to it. With improved global risk appetite, we expect sustainable flows into the domestic equity markets to continue. Against this backdrop, Indian equities appear attractively priced to generate superior returns over the medium to long term.
Prateek Pant
Head of Credit Products and Services,
RBS Private Banking