Given the constrains faced by the FM worked while rolling out this budget - slowing growth, stubborn inflation, high fiscal and current account deficit, dwindling domestic saving and investment rates, to name a few - the budget seems to be the best that could be done in a bad situation. He rightly pointed out the fact that CAD is a larger concern than Fiscal deficit.
The FM has managed to lay down a game plan to Reign fiscal deficit (to 4.8 per cent by FY14 as against 5.2 per cent now) and thereby avert large crowing out of private spending (especially on investment) and a credit rating downgrade.
At the same time there has been a move to stay away from a populist budget in the run-up to the next general election. Direct Benefit Transfer and food securities bill remains the main plank for “pro-people” measures, without any major increase in outlay.
The budgetary layout was Rs 16.65 lakh crore (Rs 16.65 trillion) and hinted out at a food subsidy bill of Rs 90,000 crore (Rs 900 billion).
The focus has been on to induce investment, especially large investment, and also financial savings, improve education and skill formation.
While some of the budget numbers are already being questioned, we do not as yet see any large anomaly. Comparison between the FY13 revised and FY14 budget estimates seems to be creating the confusion as the FY13 revised numbers have been scaled down substantially from the FY13 budget estimate numbers (especially for planned and capital spending).
The common man (or rather the rich common man) will now have to shell more tax on his Income. Commenting on the impact on various industries, we can surmise as follows:
BFSI: The impact would be mixed bag if one views the loosening of norms in housing loans (Positive for HDFC, LIC Hsg) and also small ticket real estate players (Puravankara, Sobha, Kolte Patil etc).
Tax-free bond norms could offer some succor to PFC and REC. The recapitalisation dole of Rs 14,000 crore (Rs 140 billion) for PSU banks could strengthen the system.
Infra: The budget has given investment benefit for high value projects which is 15 per cent tax benefit for large projects greater than Rs 100 crore (Rs 1 billion).
This is positive for capital goods sector. L&T & IRB should benefit from imminent award of 3000 kms of road projects in the next six months. Increase in limit of infra debt fund limit from Rs 250 bn to Rs 500 bn is positive for infra companies
Real estate: Interest deduction raised by additional Rs 100,000 to Rs 250,000 for loan up to Rs 25 lakh for first home buyers would benefit to realty companies in affordable housing.
FMCG: Increase in specific excise duty by 18 per cent on cigarettes will be negative for ITC and VST. Increase in Tax on royalty from 10 per cent to 25 per cent is negative for HUL, Nestle, GSK - CH and Colgate. Removal of duty on readymade garments is positive for lovable and Page.
Anand Rathi is chairman of Anand Rathi Financial Services