The Hindu Business Line : Meeting expectations

He had to ensure that the Budget would meet the expectation of the common man while also trying to safeguard the efforts made to cap inflation while ensuring the economy is on consistent growth track.

Focus sectors

Reduction in Cenvat from 16 per cent to 14 per cent and CST from 3 per cent to 2 per cent will also work to this effect.

The focus was on sectors such as agriculture, education and healthcare, which saw an increase outlay of 20 per cent.

Small and marginal farmers will get maximum benefit on account of complete waiver of loans, while for the others the one-time settlement option will prove advantageous.

Infrastructure development has also received a boost with increased outlay. Other sectors such as hospitality and healthcare are set to benefit as a result of the five-year tax holiday announced.

Further, a 2 per cent drop in excise duty on all products coupled with CST reduction of 1 per cent translates to reduction in inflation for most manufactured consumer products by 3 per cent.

More disposable income

A noteworthy step was the increase in the individual tax exemption slab for salaried employees from Rs 1.1 lakh to Rs 1.5 lakh, from Rs 1.45 lakh to Rs 1.8 lakh for women assessees and up to 2.25 lakh for senior citizens.

This results in additional disposable income in the range of Rs 4,000 to Rs 44,000 depending on the income group, which will definitely give a boost to the investments and savings trend and also drive consumption.

PAN mandatory

Also, making PAN mandatory for all financial markets while also making it the sole identification in the securities market is a key step towards achieving standardisation and improving processes.

The increase in short-term capital gains tax to 15 per cent could however attract mixed views in the short term.

However it will aid in encouraging long-term investment and improving fundamentals.

A point of concern is the revenue deficit target that has been deferred by another year.

This, along with off-Budget accounting of food, oil, fertiliser and debt relief, which translates to high fiscal deficits, does pose a concern.

Another point to be noted is that of STT (Securities Transaction Tax) being considered as an expense as against a tax, which could disappoint the market, but is a step in the right direction as LTCG (long-term capital gains) is tax exempt.

The main agenda of a Budget is to remove the roadblocks and provide a roadmap for future development.

This Budget has managed to meet the expectation of the aam aadmi while also ensuring that the momentum of economic growth continues to be maintained.

(The author is Chief Investment Officer (Equity), ICICI Prudential AMC.)

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