Stocks

Maintaining fiscal discipline — a big plus

Ashishkumar Chauhan MD & CEO | Updated on January 20, 2018 Published on March 01, 2016

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BSE’s suggestion on retail participation in bond markets gets assent

The focus of this Budget is on inclusive growth where the benefits are aimed at being delivered to all strata of society. It is seen in the nine-point agenda spelt out by the Hon’ble Finance Minister. Agricultural, rural, social sector, education, infrastructure, financial sector, governance, fiscal and tax.

The highlight of the Budget was that despite the global recessionary conditions, the government has maintained its fiscal discipline with fiscal deficit revised estimates for 2015-16 retained at 3.9 per cent and for 2016-17 maintained at 3.5 per cent. This now opens the possibility for the RBI to reduce interest rates to stimulate growth.

All-out support

In the financial sector, the government has ensured full support to PSU banks, with initial capital infusion of ₹25,000 crore, besides additional support to them as and when required. The investment limit of foreign portfolio investors (FPIs) in Central Public Sector Enterprises (CPSEs) and listed PSU banks has been increased to 49 per cent from 24 per cent. The investment limit for foreign entities in stock exchanges has been enhanced to 15 per cent from 5 per cent, on par with domestic institutions. The FDI limit has also been revised upwards for the insurance and pension sectors. This will enhance global competitiveness of Indian institutions and accelerate adoption of best-in-class technologies and global market practices.

Ease of doing biz

There have been a few minor changes in the tax structure. Consolidation and restructuring of the tax framework continue as a part of the agenda of ease of doing business as seen in the previous budgets.

A marginal increase in STT for options (to 0.5 per cent) is not expected to lead to a shift in transactions to the underlying equity markets from derivatives.

As requested by the BSE, the Budget allows for increased retail investor participation in the government bond markets through the stock exchange mechanism, which would give access to retail investors to the safest financial instrument in the country. There is no additional service tax or long-term capital gains (LTCG) tax as expected by the market. This is a positive move.

The Budget has now permitted 100 per cent FDI in food and food products produced and manufactured in India.

Overall, the Budget has taken a long-term view.

Published on March 01, 2016
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