I compliment finance minister Nirmala Sitharaman for a wonderful maiden budget. There are many themes in it that resonate with a New India. It’s a budget that puts out the theme for the next 4-6 years about India’s future in the global comity of nations.
I commend the finance minister for continuing to maintain fiscal discipline by targeting fiscal deficit at 3.3% of GDP.
I am also very enthused by the recognition of the fact that global interest rates and liquidity are very conducive, and it is time for India to carefully but selectively leverage global liquidity for funding our growth aspirations. This is something, if well done, can make a significant difference to the domestic interest rate scenario.
I am happy with the focus on empowering women, Digital India, rural India and significant changes in the financial sector and the broader corporate sector. Talking specifically about the financial sector, bringing housing finance companies under Reserve Bank of India is a positive move. I am also happy about bringing the corporate tax rate down to 25% for corporates with a turnover of up to Rs 400 crore, which will enthuse many small, medium and growing enterprises to work with a greater sense of incentive and performance.
Recognising the importance of the non-banking financial company (NBFC) sector in India’s growth is a positive signal. Also, the ability for PSUs to go below 51% is the first step towards strategic divestment in the Indian public sector enterprise. There’s a huge focus on ‘Digital India’ and the power of Aadhaar by encouraging digital transactions, and discouraging cash transactions. This will enable growth of formal financial savings in the economy.
As far as the tax situation is concerned, the prime minister has rightly said that some of this burden has to be borne by people who can afford it. Getting the balance right between keeping the incentives to invest for entrepreneurs and higher income classes contributing more to the economy is something that Indians must accept as their contribution towards a New India.
For consumers and spenders, particularly those buying electric cars or affordable homes, there is tax benefit on interest rates that is significant and material. It is a big boost to get the right kind of consumption take place in the Indian economy.
As far as the financial markets are concerned, the bond markets have voted with yields coming down as a signal of significant global liquidity that will come into India. If GoI is able to maintain the fiscal deficit as estimated at 3.3%, global investors will bring a flood of liquidity in both equities and bond markets. Of course, the fiscal discipline will enable Reserve Bank of India to be bolder in the reduction of interest rates.
I truly commend Nirmala Sitharaman and GoI under the leadership of Narendra Modi for what is a path-breaking budget.
(The writer is MD-CEO, Kotak Mahindra Bank)