Budget: A few positive prescriptions for a slow cure, says JM Financial MD

The second Budget during the second term of the government shows a clear continuity in the policies. When the Indian economy is suffering from multiple ailments, there were high expectations for some ‘surgical interventions’ to effect a swift cure with big bang stimulus. But it is short of big surprises. However, there are a few positive prescriptions for a slow cure, making the Budget pragmatic and balanced.

It is reassuring to see that the deficit target was kept within expected lines and 10 per cent growth in nominal gross domestic product is projected. The divestment target is the biggest ever and it reflects the government’s intent to leave more space for the private sector, though the target looks somewhat challenging. Driven by this and the high growth in other non-tax revenues, it is estimated to drive a high 18 per cent year-on-year growth in capital expenditure — again one of the highest in recent years.

It was surprising to note the tinkering of and reducing incentives for 80C exemptions, even as we set big targets for divestment. This is likely to be a drag on housing demand. A majority of people may not move to the new tax regime now, though the saving-averse but spending-happy millennials may grab the opportunity.

It is a mixed bag for the embattled non-banking financial company (NBFC) sector, which also pushed for aspirational incentives to get out of the current squeeze. NBFCs were praised as one of the key pillars for Aspirational India, but did not receive any big perks. The sector accounts for 20 per cent of the total credit and plays a key role in last-mile credit delivery.

The tweak in eligibility limit for debt recovery, reduction in loan size directly, and the push to MSMEs will indirectly help the sector. More importantly, the NBFCs will now be pinning hopes on the promises to ensure fund flow and revision of the partial credit guarantee scheme to come out of the current crisis.

Vishal Kampani

Kampani is Managing Director, JM Financial Group