The FY20 Budget was a pleasant surprise to markets because of its 3.3 per cent fiscal deficit. Borrowings numbers were retained at Rs 7.1 trillion with a deliberate focus on overseas borrowings (sovereign dollar bond). This will provide a dollar yield curve for Indian borrowers and will lead to substantive savings in borrowing costs, and a decline in domestic G-Sec yields.
Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI
It may be noted that for India, only 4 per cent debt is external (Japan is at 5 per cent with a debt/GDP ratio at 253 per cent).
There are several innovative features in the Budget that may have escaped attention. The NBFC sector has been provided specific focus in the Budget.
Regulatory control of NBFCs will shift to the Reserve Bank of India, and this will create a level playing field in the market. The banks will be provided with a recapitalisation of Rs 70,000 crore, and have been incentivised for purchasing assets from NBFCs. The SME sector will be provided interest subvention at 2 per cent under the interest, provided they are GST registered.
This will facilitate fund flow to small and medium enterprises, as well as increased formalisation.
The Budget has also given a big push to affordable housing with an additional deduction up to Rs 1.5 lakh for interest paid on loans borrowed till March 2020. Rental housing will be promoted through a model tenancy law.