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A Budget for a New India

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Publish Date: July 05th, 2019

Uday Kotak
Kotak Mahindra Bank Ltd.

I compliment the Hon’ble Finance Minister Smt. Nirmala Sitharaman for a wonderful maiden budget. There are many themes in this budget which resonate with a new India. It is a budget which puts out the theme for the next 4-6 years about our future as a country in the global comity of nations. I commend the finance minister for continuing to maintain fiscal discipline by targeting fiscal deficit at 3.3% of the GDP. I am also very enthused by the recognition of the fact that global interest rates and liquidity are very conducive, and it is time for India to carefully but selectively leverage global liquidity for funding our growth aspirations. This is something, if well done, can make a significant difference to the domestic interest rate scenario.

I am happy with the focus on empowering women, digital India, rural India and significant changes in the financial sector and the broader corporate sector. Talking specifically about the financial sector, bringing housing finance companies under RBI is a positive move. I am also happy about bringing the corporate tax rate down to 25% for corporates with a turnover of up to Rs. 400 crore. This will enthuse many small, medium and growing enterprises to work with a greater sense of incentive and performance. Recognising the importance of the NBFC sector in India’s growth is a positive signal. Also, the ability for PSUs to go below 51% is the first step towards strategic divestment in the Indian public sector enterprise. There is a huge focus on ‘Digital India’ and the power of Aadhaar by encouraging digital transactions, and in fact discouraging cash transactions. It will enable growth of formal financial savings in the Indian economy.

As far as the taxation situation is concerned, the PM has rightly said that some of this burden has to be borne by people who can afford it. Getting that balance right between keeping the incentives to invest for entrepreneurs and at the same time higher income classes contributing more to the Indian economy is something which Indians must accept as their contribution towards a new India.

For consumers and spenders, particularly buying electric cars or affordable homes, there is tax benefit on interest rates, which is significant and material. It is a big boost to get the right kind of consumption take place in the Indian economy.

As far as the financial markets are concerned, the bond markets have voted with yields coming down as a signal of significant global liquidity which will come into India. I do believe that if the government is able to maintain the fiscal deficit, as estimated at 3.3%, global investors will bring a flood of liquidity in both equities and bond markets. Of course, the fiscal discipline will enable the RBI to be bolder in the reduction of interest rates.

I truly commend the FM Smt. Nirmala Sitharaman and the government under the leadership of Hon’ble PM Shri Narendra Modi for what I believe is a path breaking budget for a new India.

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