The bond markets will cheer on Monday as the government’s net borrowing target of $75 billion, for FY21, is lower than Street estimates. Further, the opening up of NRI investments into G-Secs (government securities) is a step towards getting India included in the global bond indices.
Tax exemption to sovereign wealth funds on infra investments, equity infusion into IIFCL and the National Investment and Infrastructure Fund, as well as proposed InvIT (infrastructure investment trusts) structures for roads and power grids, will attract new pools of institutional money into the infrastructure sector.
The government’s decision of upholding power purchase agreements as well as the opening up of railways, city gas distribution, and electricity supply to the private sector, are welcome steps. These will help break long-standing monopolies and benefit consumers with better pricing and services.
The on-shoring of the bullion market at the IFSC at GIFT City will enable price discovery of precious metals traded overseas by Indians. Also, trading in rupee derivatives and withholding tax incentive on listing of masala bonds will make GIFT City compete well with other IFSCs. Overall, the Budget is reformative in nature and the FM has set a long-term growth narrative for the economy.
Nakhate is President and country head of Bank of America