The finance minister Piyush Goyal unveiled the final budget of the BJP led NDA government. As expected the FM did an incredible job in offerings sops to all the class where the votes are concentrated to ensure that the mission 272+ gets support. Here’s our, Sakal Money’s, take on the budget, its impact on the economy and what an investor should do amidst this.
Prime Minister Modi is considered to be one of the great strategist and orator. Ever since he had assumed office in May 2014, he has received a thumbs up from the audience. Be it the surgical strike, or the Goods and Services Tax Bill, Make in India campaign or the Swach Bharat Abhiyaan, Modi has gained popularity. A similar outlook was seen from the people when the PM and his team came out with the final budget of their term.
The budget primarily focused on the welfare of the middle class, farmers and socially backward classes. Tax reforms were announced for the middle class that included a full tax rebate for individuals with taxable income of less than Rs 5 Lakhs. Also, standard deduction was increased to Rs 50,000 from existing Rs 40,000 along with an increase in the gratuity limit from Rs. 10 lakh to Rs. 20 lakh from the next financial year.
The budget also took care of the real estate sector with a tax exemption on unsold inventory for two years. The FM also announced constituting a GST council to reduce the burden on home buyers.
For the farming community, the FM had multiple offerings this time. Starting from Rs 6000 per annum income for small and marginal farmers to interest subvention of up to 5% in allied sectors such as animal husbandry, and fisheries were announced.
For the socially backward classes, the FM made no mistake and announced a substantial increase of 35.6% and 28% in the budgetary allocation for the welfare of SCs and STs respectively.
Lastly, the FM announced the government's focus in areas concerning compliance, faster processing of income tax returns, instant refund, and reduction in the number of GST returns for small business owners. The unorganized working class got the benefit from the mega pension plan that provides for Rs 3000 per month. Lastly, the defense sector received its highest ever allocation of Rs. 3 lakh crore.
We, at Sakal Money, believe the Rs 27.84 lakh crores budget is aimed at the masses - benefitting three crore salaried individuals, ten crore workers, and twelve crore small and marginal farmers).
For the farmers, where falling realization has remained a principal cause of concern, the support of Rs 6,000 annually per household for small and marginal farmers and benefits to allied sectors shall bring cheer if implemented well. The cash in hand for farmers could push the rural demand in sectors such as fast moving consumer goods including food, beverages, and bakery items.
The announcements for real estate sector could support the momentum in affordable housing and shall provide a sigh of relief to builders who have been struggling with liquidity crunch in the sector.
The relaxation in income tax could translate to higher disposable income for middle class population. This should be positive for low-value consumer durables, fast-moving consumer goods (FMCG), and automobile segments.
To conclude, we can say that the budget doesn't play a vital role in influencing the demand for products but provides for reforms, and decision making on spending while shaping the economy. India as an economy will see limited support from the global economy and will remain primarily shielded from US-China trade war as it is not involved directly exposed to the Chinese value chain. Further, it is expected that 200 million Indian will be entering the middle-class bracket over the next decade. This could translate to massive growth on the domestic front supported by rising discretionary spending. India is a classic example of an economy with many idiosyncratic domestic factors that are less impacted by a headwind of a global tussle or any internal factors such as election or union budget. We remain positive on the demographics of the economy, its people and continue to stay long.
Anecdotes from industry stalwarts
"India's middle class, small traders and farmers are the lifelines of its economic growth. By catering to these ambitions #Budget2019 infuses hopes for millions of dreams," Adani Group Chairman and Founder Gautam Adani tweeted.
Mahindra Group Chairman Anand Mahindra said in a tweet, "I was bracing for a populist, profligate budget driven by ''election panic.'' I’m just grateful that the reliefs to the key middle class & farmer segments were delivered in a measured way without risking bankruptcy of the economy. This was a controlled, pump-priming exercise..."
Walmart India President and CEO Krish Iyer said, “The Budget rightly focused on the middle class, rural sector and on enhancing farmers' income.
ITC's Sanjiv Puri said, "The interim Budget proposals should augur well for the Indian economy by providing a growth impetus through a boost in consumption as well as an inclusive framework designed to benefit agri and rural communities, unorganised sector workers as well the middle class."