The intent and thought process in today’s Budget speech reminds us of these lines in the famous poem by Shri Harivansh Rai Bachchan –
“Asafalta ek chunauti hai, ise sweekar karo,
kya kami reh gayi, dekho aur sudhar karo.
Jab tak na safal ho, neend chain ko tyago tum,
Sangharsh ka maidan chhodkar mat bhago tum.
Kuch kiye bina hi jai jaikar nahin hoti,
koshish karne walon ki haar nahin hoti.”
In our opinion, today’s Union Budget for 2017-18 is a continuation of the overall Pro-Reform, Pro-Governance and Pro-Growth manifesto of the ruling government.
We are encouraged to note that our thought process documented in the Pre-Budget Note (dated Dec-13-2016) wherein we had highlighted 5 key aspects – Improving MSME health, Tax Reforms, Rural Impetus, Infra-Public sector boost, Housing for All have been the revolving tone in today’s budget.
Perhaps for us, the single most important takeaway has been the reforms on “Political Funding”. We strongly hail the FM for this bold move and reckon that this single step sends out a very strong message to the world community. It is a testimony to the ongoing thrust on de-railing corruption, enhancing transparency and increasing the taxation ambit. In our opinion, Rating agencies would sooner than later pay heed to this drastic ongoing transformation.
Net-net, the budget with its hawk eye focus on Fiscal Discipline is indeed commendable and has been hailed by Markets, Industry leaders, Economists and Rating Agencies.
There were high expectations of increase in Capital Gains taxation and Service Tax rates ahead of the budget. With status-quo being maintained on both, it has come as a relief for the markets; which otherwise could have seen a negative reaction today.
The increase in allocation to MNREGA to Rs. 48,500cr, up by ~ Rs. 10,000cr augurs well for the rural economy. At the same time, the reduction in tax liability on tax slab between Rs. 2.5-5lakhs would have a positive rub off on consumption demand. These two, along with a. hike in government salaries b. OROP pay-outs c. good monsoon d. easing of interest rate cycle e. secular trend of urbanization, rising per-capita incomes and changing lifestyles – all augur well for the domestic consumption led demand.