If you were an investor looking for a big pop in the stock markets or a taxpayer looking for new sops, this Budget has likely proved a sore disappointment. But if you have been deprived of such instant gratification, as an investor and taxpayer, you should take heart from the fact that this Budget takes a genuinely long-term view of the economy’s abiding problems, to deliver lasting fixes to alleviating rural distress, providing a social and agri security net for the masses, and ironing out the pain points in the interface between the Government and the citizenry.

From an investor’s point of view, the feel-good generated by the FM’s decision to stick to his fiscal deficit target of 3.9 per cent for this year and 3.5 per cent for the next may be designed to cheer foreign portfolio investors and keep rating agencies at bay. But then this feel-good is quickly eroded by the trebling of STT on options trades and the decision to stick to deadlines on GAAR. This in fact, explains why the markets were in the red throughout the reading of the longish budget speech, to recover only marginal ground later.

In a budget speech that read more like a strategic mission statement for a Nifty company, than an annual declaration of accounts on the fisc, Finance Minister Jaitley set out nine specific areas on which his Government will look to kick-start growth and broad-base development over the next 3-5 years.

Three thrust areas

There are three thrust areas that are of import to the economy and investors. One, the efforts to strongly ratchet up rural outlays after two successive years of bad monsoon, which will hopefully get the rural demand engine back into higher gear, and in the process help both India Inc and the economy. If 2016 proves to be a La Nina year as the Economic Survey hinted, that can help the entire consumption leg of the economy and markets pick up pace from here. That should be good news for investors in consumption stocks.

Two, despite the paucity of funds, the Budget continued with its thrust on infrastructure spending, with sharply higher outlays for roads and generous allocations for fund-raising through infra bonds, combined with promises to iron out glitches in the PPP structure. All this, combined with better performance on disinvestment next year may help the public spending leg of the economy gain traction. This would be a plus for capital goods makers and public sector stocks.

Three, and this is the disappointing part, the Budget has failed to make the badly needed allocations for recapitalisation of public sector banks and has stopped with the frugal Rs 25,000 crore allocation indicated earlier. Here, soft measures such as the setting up of the Bank Boards Bureau, tax breaks to asset reconstruction firms and the promise of stake dilution in some PSBs will hopefully send out the right signals to investors and depositors. But we clearly need to hear more on this front, for bank stocks to wake up and smell the coffee.

Get set to give up more

Overall, with the FM clearly admitting that the tax giveaways in this budget have cost him a mere Rs 1,060 crore, while the tax hikes would rake in Rs 20,670 crore, both individual and corporate taxpayers need to brace for giving up more than they gain in the next one year.

But then, what the FM has sown now in the form of higher rural outlays, infrastructure spending and tax reforms, they may stand to reap over the next 3-5 years.

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