I like the farm income support measures though the amount was on expected lines. That said, in terms of how they have done it has been more innovative than a vanilla farm-loan waiver. So, I liked that part of it. Then there are sops for the middle class. Individual taxpayers having taxable annual income up to Rs 5 lakh will get a full tax rebate and therefore will not be required to pay any income tax. As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc. In fact, with additional deductions such as interest on home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having even higher income will not have to pay any tax.
Whilst on the face of it, it is a positive, it’s too small an amount to move the needle too much. For instance, I don’t think this would lead to people rushing to buy high-end cars or bikes. I did not expect the government to roll back the long-term capital gains tax (LTCG), which was introduced earlier.
There are also proposals for the real estate and the housing sector, but I am not convinced that it will significantly change things for the housing sector in any way. The government has tried to do something for the housing sector, which I don’t think will move the needle too much. I still do not understand how the problem of unsold properties will get resolved amid higher interest rates. While cosmetically the proposals look good, the ground reality is quite different and may not change very much.
Overall, the budget deficit seems fine but the borrowings by the government are huge for next year. This will likely keep interest rates elevated and as a consequence problems for the real estate sector and non-bank finance companies (NBFCs) are not likely to go away.
The author is CEO of Avendus Capital Alternate Strategies
(As told to Puneet Wadhwa)