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The Budget was announced on the sidelines of a pre-election year, a high fiscal and current account deficit and worries of a rating downgrade.
The Finance Minister has delivered a credible >Budget .
Affirmative action at driving fiscal consolidation has been the biggest takeaway, with the Finance Minister increasing taxes on items consumed by the rich and hiking corporate tax and income tax of individuals earning more than Rs 1 crore per annum.
On the issue of promoting investments in the financial sector, there has been some shortfall in expectations.
TDS has been imposed on the sale of houses above Rs 50 lakh and service tax for new flats increased.
Besides, Dividend distribution tax on debt mutual funds has been increased to 25 per cent from 12.5 per cent. .
Finally, the Government has also demonstrated clear intent to facilitate infrastructure development.
Steps like an investment allowance at the rate of 15 per cent to a manufacturing company investing more than Rs 100 crore in plant and machinery over the next two years have been aimed at incentivising investment. Infrastructure sector is now poised for growth.
On equity investment, we are more positive now. With the roadmap on fiscal consolidation in place, there is a strong case now for increasing allocation to equity over the next three months.
Taxing the classes
On the fixed-income side, the market sentiment has been volatile, post-budget, on higher-than-expected government expenditure (borrowing of Rs 630,000 crore, against market expectation of Rs 590,000 crore.
This has led to 7-8 bps spike in bond yields. The Budget has rationalised taxation in favour of the masses vs the classes.
(The author is MD & CEO, ICICI Prudential AMC. The views are personal)
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