'No proposal to give major flip to consumption demand'

'No proposal to give major flip to consumption demand'

(Representative Image/iStock image)

By Nilesh Shetty

Given the state of the economy, expectations were running high that the budget may have significant proposals to revive consumption demand. However none of the Budget proposals give a major flip to consumption demand. Nor do they address major problems faced by select sectors like real estate, power, and credit availability for below investment grade borrowers. 

The major announcement in the budget of revision in tax slabs may be a non-starter as the tax payer may be worse off under the new slabs if exemptions and deductions are removed. To that extent sell off in Insurance companies assuming lack of investor appetite for their products due to loss of tax exemption may have been unwarranted. The abolition of divided distribution tax and shifting of taxability in the hands of dividend receiver may lead to significant tax increase for HNIs. Family run companies may now prefer the buyback route for paying of dividends. 

The budget has been devoid of any major ideas to revive consumption or investment demand. It will be up to the natural business cycle to revive corporate earnings which could be a gradual process.

(The writer is the Associate Fund Manager of Quantum Mutual Fund)

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