 "Jaspal Bindra, Executive Chairman, Centrum Group")
The government's first Budget in its new term establishes a strong foundation for continuity and stability in the reforms announced in the Interim Budget. The finance minister has taken an assertive stance by focusing on employment generation, skill development, and the revival of rural and agricultural sectors — addressing critical issues head-on. A series of changes in direct tax initiatives, including increased standard deductions and higher NPS contributions, benefit salaried employees. However, unexpected increases in long term capital gains (LTCG) and short-term capital gains (STCG) tax rates might temporarily dampen equity market sentiments. This impact is likely to be short-term and should not fundamentally alter the market's growth momentum.
India's FY25 capital expenditure outlay is maintained at Rs 11.11 trillion, in line with the Interim Budget and up from last year's estimate of Rs 9.5 trillion. Meanwhile, the fiscal deficit for FY25 has been reduced to 4.9 per cent from 5.1 per cent (Interim Budget). This higher capex outlay combined with a lower fiscal deficit will support the ongoing momentum of India's growth story. Additionally, it puts the bond markets on a bullish track, which had been volatile due to high yields.
It's encouraging to see the emphasis on the MSME sector, which was severely impacted during the pandemic. Doubling the limit of Mudra loans for past borrowers and introducing collateral-free credit guarantee schemes for MSMEs will give banks confidence to increase lending to the sector. Moreover, the new assessment model for MSME credit, using digital footprints, is a significant step forward in driving financial inclusion at scale.
The government's continued efforts to promote affordable housing are commendable. The allocation of Rs 10 trillion under the PMAY scheme will motivate people to transition from renting to owning homes. This shift is anticipated to generate a multiplier effect across various allied sectors, including cement, steel, paints, and housing finance companies.
Emphasising the enhancement of the resolution process through the IBC via a comprehensive, tech-enabled platform is a forward-thinking strategy. This approach promises to accelerate resolutions, thereby expediting investments in key sectors such as infrastructure, which constitutes a significant portion of companies seeking resolution through the NCLT.
However, the finance minister did not provide an update on the previously proposed public sector bank (PSB) privatisation. With NPAs well under control and significant improvements in the profitability of several PSBs, this might have been an opportune moment for the government to unlock value.
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