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Union Budget 2016 – Score card for the Finance Minister

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Category:  Economic  
| 01-03-2016 05:40 PM

Union Budget 2016 – Score card for the Finance Minister

Not long ago, the budget day including the Railway budget used to be a pretty important day for the cross-section of Indian Society. The Railway budget was viewed as a pointer to what can be expected over the next couple of days from the Union Budget. Slowly, but surely, we seem to have moved out of the budget euphoria. Everything appears to be moving on an even keel rather than presenting big surprises. Populist budgets are perhaps behind us and rightly so. What the FM has attempted in his second full budget is more pragmatic and focuses more on the agricultural sector that impacts the lives of a majority of our population living below the poverty line. Although the predominance of agriculture in Indian economy is waning a bit, we can ill afford to ignore our farmers. The cities and towns will continue to depend on them for the daily staple. Therefore, with the rural emphasis, Mr. Jaitley has perhaps addressed the long term objectives of the nation.

The aam aadmi has got used to the high price of essential commodities and his monthly budget refuses to even glance northwards. It is always on a southbound trajectory.  With our population growth continuing to climb year after year, it is only natural that the government needs more money to cater to the aspirations of a growing society.  On the infrastructure front, we are still miles behind many developing/developed nations.  Nevertheless we can be proud that road connectivity between most major cities in India today is impressive.

Stock markets

The keen jerk reactions from the stock markets gave opposition parties the opportunity of some caustic comments and understandably, they seized every bit of it. But, a day later the market has reversed the losses and impressively so with over 800 points on the sensex and more than 240 points on the Nifty, which is also the biggest single day gain in recent times.  If the momentum gained today can be sustained, Indian bourses can well be on the road to reversing much of the losses suffered earlier in the year.

Focus on Agriculture and the rural sector

The core of this budget can be termed a Kissan budget and that should make lots of people in rural India happy.  Once the farmers getting remunerative prices for what they produce and the constant fear of poor monsoons or crops being destroyed an excess of rains, one can expect to see a green revolution of sorts.  Bringing in the insurance sector to play a major role in this direction is a laudable measure.

Salaried class

The woes of the salaried class have been addressed to some extent. Mr. Jaitley has put a little more money into the pockets of the salaried class. While the quantum is far too inadequate for a daily diwali, it will help them tide over price rises on other fronts. There was uproar on the proposal to tax PF withdrawals. However, the position has since been clarified and only the interest component is now proposed to be taxed.


The reality sector is another big gainer from direct as well as indirect measures provided in the budget. This is also seen as a smart move by the FM since concessions extended to the realty sector will generate additional revenue for the government from a plethora of allied industries while providing large scale employment in the rural sector. The measures also come as a huge relief for the aam aadmi since housing is set to become affordable for the EWS sector. Service tax exemption for new homes below 60 sq. meters should make the middle class home buyer extremely happy. This should also help the vision of the prime minister’s vision of ‘housing for all’ by 2022 a reality. The salaried class will benefit from additional concessions given in income-tax including for the first time home buyers. Indirect benefits from these concessions will also flow to the steel and cement sector in particular.


In keeping with the ‘Make in India’ scheme announced by the Prime Minister earlier, start ups have received considerable concessions in this budget. Start ups paying no tax on profits in the first 3/5 years will encourage more venture capital funds to flow in.  Perhaps, this is also one sector that has received the best attention of the FM. A further promise is to tweak the Companies Act to enable registration of start ups in just 24 hours.  With knowledge based industries growing at a rapid pace, this measure should encourage young talent to explore more entrepreneurial opportunities. 


Infrastructure is another sector that has received significant fillip from the budget. With a total outlay of Rs 2,21,246 crores  in the budget, this sector is bound to witness a flurry of activity in the coming days. The pace of road construction is set at an ambitious 100 kms every day. Many of us are already experiencing the benefit of good roads in ushering in all round economic development.


Education has received considerable attention from the FM but this is perhaps one sector where enough is never enough. There is an urgent need for government intervention into private primary education that is virtually breaking the back of parents across the nation.  Lots can be done in this direction away from the budget and one hopes that the government is listening.


The 25,000 crores allocated for recapitalization of banks is just a drop in the ocean. Hopefully the coming days will see lot of action on the NPA front and strengthening of public sector bank balance sheets. The practice of large business owners going scot free after defaulting several crores must go. Every single individual or corporate who borrows from the bank should be individually responsible for the repayment. Systemic infirmities need to be addressed head on and securitization of loans should go beyond mere paper work.

Sunil Patni, CFA
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