The Budget has a bigger vision in place and is not focused just on the next fiscal. There is a larger economic vision and the government is trying to push that. One needs to look at the work that is being dome done in roads, infrastructure, financial markets, divestment etc. This is the larger picture and the government is putting the public assets to good use. The idea for this had been articulated long ago. The corporate tax structure is such that there are less inventions now and more compliance. That’s the vision this government is working with.
Allocations to various sector, on the other hand, have been done to the extent the government could given the limited spending room. So, most of the government’s favourite themes have got a decent budgetary spend.
The three key positives, according to me, in this Budget is the managing the macro-economy and the investment in infrastructure. The second is the fact that public assets have been put to good use. There is no point in being in companies that are not viable. So, the government does have an ambitious divestment target. In my view, divesting stake in Life Insurance Corporation of India (LIC) is a very big thing conceptually and is a big leap of faith. This could see an improvement at the operational level in the state insurer. I think this is a step in the right direction. LIC could have gone the BSNL way in a few years and lost market share. This move, on the other hand, will make it more competitive and robust. The government has also rationalised the tax structure by doing away with the unnecessary exemptions and deductions.
The few negatives would include the fact that dividend distribution tax (DDT) has not been completely abolished, but has been passed on to the investors. As a result, investors will be left with less money in their pocket. The second is that the I-T structure for individuals has become more complicated. Withdrawing exemptions from corporates is understandable to a certain extent, but individuals should be spared from such things. Most individuals will not understand all the complexities and may end up doing the wrong thing.
With Saturday’s fall of around 1,000 points on the S&P BSE Sensex, the markets, I believe, are factoring in most negatives. While they will start focusing on the global developments, they should recover a bit going forward. For those who wish to invest from a medium-to-long term, the fall presents a good opportunity to buy.
U R Bhat is managing director at Dalton Capital. Views are personal.
(As told to Puneet Wadhwa)