By Krishna Kumar Karwa
The Finance Minister has within the constraints of a slowing economy and the need to keep the fiscal deficit under check delivered a balanced budget. Measures like 100% tax relief to Sovereign funds investing in Indian Infrastructure, increase in FPI limits for investing in Corporate Bonds, opening up certain government securities to NRIs and increasing the withholding tax provisions by 3 years all point to an effort to mobilise global funds to invest in domestic infrastructure and keep local interest rates under check . The intention to IPO LIC will be a big positive for corporate governance and transparency and will open up one more avenue for fund raising for the government over the years. To privatize a small Bank like IDBI bank is a step in the right direction where the government is clearly signaling its intention to move out of areas which can be run well by the private sector . Capital Market investors will be disappointed with no relief on LTCG and the lack of big bang stimulus on real estate or infrastructure. The removal of Dividend Distribution Tax seen as a continuation of earlier step of reducing corporate tax is well appreciated and sends the right signals to local and global investors. The option to individuals to opt for a lower tax slab structure with no deductions or to continue with the earlier higher slabs with deductions for home loan EMIs , investments in insurance etc seems slightly confusing. In a country like India with a young population with poor social security it is imperative to incentivize young India to save for the future and own a house as well. The provision to settle existing Direct tax litigations by paying the Disputed tax and getting relief on penalty and interest should see big success ad raise revenues for the government almost immediately. By keeping the targeted fiscal deficit at 3.5 % the FM has succeeded in keeping global rating agencies and investors satisfied. Capital markets though currently disappointed should take this in their stride and will take cues from the expected rural india recovery post a bumper Rabi season and global reactions to coronavirus and expected trade standoffs between the US and Europe .”
(The author is Managing Director at Emkay Global Financial Services)
