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Budget FY15 makes a good start

In my view, this much anticipated first budget of the new government has done a great job in setting the tone for the next five years. Budget FY15 highlighted the new government’s rational approach to policies for taxation, government spending and growth and struck true to their election manifesto. Infrastructure, Housing & Finance sectors were amongst the biggest winners, with key measures to improve funding availability to low-cost housing through NHB, to real estate through REITs and to infrastructure through banks and Infra Investment Trusts.
In line with the manifesto, a start was made towards smart cities, industrial corridors,  higher education, low cost housing and various infrastructure projects, amongst others. Roads, ports and airports too are expectedly going to continue to be thrust areas for the new government. Agriculture got its due attention with various funds and schemes that should eventually help tackle food inflation. The budget also made some indications of areas we can expect measures on in the coming year from the new government such as coal availability, CBM & PNG, gas pipelines, urea, ship-building industry, etc. and also mentioned that GST was firmly in their near-term agenda. All in all, there is a lot in budget that creates optimism of continued policy impetus yet to come across a range of sectors.
Increasing the FDI limit in defence & insurance was also a step in the right direction. While the laws for retrospective taxation were not repealed outright, the government acknowledged a commitment to rationalize taxation matters pertaining to foreign investors. Moreover, another key measure for foreign portfolio investors was that their income from transaction in securities would be treated as capital gains instead of business income currently. Lower tax rate on interest foreign borrowings was also extended. Overall, the budget appeared investor friendly and should further encourage continued inflow of funds into the country in line with the improving economic outlook.
Also positive was the fact that no major spending binge was announced and fiscal prudence was also maintained, sticking to a 4.1% fiscal deficit target. While the tax revenue assumptions may still be a bit on the optimistic side, but a key area where the budget maths differed from the vote on account was in its assumption of higher non-tax receipts, indicating the new government’s resolve to also accelerate the disinvestment agenda, amongst other things.
Over the next year or so, I’m hopeful that this new government distinguishes itself on the execution front more than anything else. Also, with more time on their hands, hopefully more concrete measures in key areas such as mining, land acquisition and GST will also see light of day over the course of the next nine to twelve months.
The opportunities are immense and I believe we have the kind of government that will come good on all these fronts, both mentioned in the budget and what likely to come outside the budget in the weeks and months to come. Overall, in my view the markets can continue to look forward to an improving outlook for the Indian economy, spelling significantly positive for Indian equities.

The views herein expressed belong to Mr. Dinesh Thakkar. The author is the Chairman & Managing Director, Angel Broking.

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