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Budget Impact: Hope and disappointment

The extra 2% surcharge on dividend distribution will have a mildly negative impact on investor sentiment if corporates decided to rebalance dividend payouts downwards to compensate

Devangshu Datta 

The was characterised by a sequence of deferred promises, a hike in rates, a hike in on high incomes, giveaways on personal front and plans for enlarged The promises include a commitment to reduce corporate tax rates over the next four years, while plugging exemptions. The government will also seek to implement If the distinction between and is removed, it might have a beneficial effect in certain sectors, especially in

There was a conscious effort to encourage manufacture and reduce raw material costs. and were lowered on many intermediate goods. Also, additional depreciation at 20 per cent was allowed for plant and machinery installed at manufacturing units, or power generating units. This should encourage investment.
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Central spending on infrastructure is to be hiked by some Rs 70,000 crore in 2015-16. The tax-exemptions for individuals investing in could help funnel household savings into infrastructure. But of course, the government will have to demonstrate its ability to get projects moving. That is a bigger bottleneck than paucity of funds.

Allocations for building roads and bridges have been significantly enhanced. This should mean a boost for construction companies and for the roads developers and managers. The power sector gains with a commitment to setting up five new "plug-and-play" Ultra Mega Power Projects. Investors will be watching to see how long it actually takes for clearances and linkages to come through in the plug and play model. A doubled "green" cess on coal could mean higher thermal tariffs if it is passed on, while encouraging growth in the renewable sector at the same time. Effluent and waste-water treatment plants get a break from and this maybe a boost to profitability for private players.

As always, and have impacts that can only be assessed after study of exact notifications. At first glance, duties have been cut on metal parts, insulated wires, refrigerators' compressor parts, catalytic converter compounds, sulphuric acid. Among sophisticated electronic equipment, duties on video cameras, endoscopes, optic fibre and LED/LCD panels have been reduced. Tablet computers should also become cheaper.

There appears to be some protection for domestic iron & steel manufacturers with duties being hiked on imports of iron and steel. Imported trucks and buses will also become more expensive, which could mean a boost to domestic commercial vehicle sales.

The extra two per cent on will have a mildly negative impact on investor sentiment if corporates decided to rebalance dividend payouts downwards to compensate. Higher service taxes will hit middle-class and lower income groups and may be a barrier to consumption. The on high incomes also seems to be applicable to domestic companies and this might mean an extra for

The has reacted with a mixture of hope and disappointment. On balance, it was a pragmatic and it may help to accelerate growth. But it was not the big bang that many players were expecting.

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