Budget 2019: 'LTCG exemption can surprise markets'

Rahul Jain, Head, Personal Wealth Advisory, Edelweiss

The upcoming budget will focus more around how to address the slowdown of the economy. It is likely that the finance minister will tread a path of caution and the headline fiscal deficit is likely to be ~3.5% of GDP for the financial year. In FY19, we saw some economic slowdown but FY20 will certainly see a turnaround in economic growth rates.

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The total expenditure numbers for FY20, if maintained at the interim budget estimates, may provide appropriate elbow room for the government to improve the quality of fiscal expenditure albeit at the cost of the needed fiscal slippage. An easier fiscal policy may cause a reaction in bond yields but we expect such moves to be transitory since the inflation trajectory remains well under control. The upshot is Indian economy may benefit from a double dose of monetary easy and a fiscal nudge. However, the exemption of LTCG (long term capital gains) can act as a pleasant surprise for the capital markets.

The author is the Head of Personal Wealth Advisory, Edelweiss.