Finance Minister Nirmala Sitharaman will present her maiden Union Budget on July 5 this year. Union Budget 2019 is likely to focus on infra development, providing tax relief to common man, resolving agrarian crisis, creation of jobs, disinvestment and fiscal consolidation. Dalal Street too expects Sitharaman to announce a slew of measures to prop up the economy.
BusinessToday.In spoke to market experts on their expectations from Union Budget 2019. Here's what they had to say.
FULL COVERAGE: Union Budget 2019
VK Sharma, Head - PCG & Capital Market Strategy at HDFC Securities said, "The first priority of the investors is that the government should stick to its fiscal discipline of keeping the fiscal deficit under 3.4% for this year. It is important because if the fiscal discipline is not maintained, markets will sell off. The government should not think of increasing the LTCG from 10% to a higher amount as it will spoil atmosphere without any collection of tax as the gains have been grand fathered. The government should do a strategic disinvestment of PSUs. This will cut fiscal deficit and also buoy all PSU stocks. The government should lower the corporate tax, which will increase net profit available for dividends and also lead to higher tax buoyancy."
Amit Gupta, Co-Founder and CEO at TradingBells said, "One of the most important expectations from the upcoming budget for the investor community, in general, would be that the reduction in Corporate Income Tax rates. The government reduced the rate to 25% for MSMEs last year, the same can be extended to the entire corporate fraternity. Watching out for the fiscal deficit target which the government sets for the coming year are other important metric for the investors. Last year, it was set at 3.4% and if this is raised in the upcoming budget, it would not be good news for the markets as it may have a direct impact on the currency as well as the government bond yields. A rise in bond yields would reduce the chances of RBI cutting interest rates any further this year, thereby contracting the liquidity in the markets.
Securities Transaction Tax, applicable only on share transactions made through a recognized stock exchange in the country, has been high for a long time and the investors are waiting for it to be brought down. Lowering it will be very positive for the domestic stock markets. The government has taken a target for homes for all by 2022 and we can expect further reforms for the affordable housing segments this time. They may also focus on divestment for some of its entities such as BEML, Air India, etc. It may announce more CPSE ETFs launch in the near future for this purpose. Renewable energy sources such as Electric Vehicles could get a boost in the form of tax exemptions. Reducing the corporate income tax rates to at least 25% would be a welcome move
If Finance Ministry decides to raise tax rates on long-term capital gains (LTCG) once again this time, this could create a negative sentiment among the investor community and may impact the markets negatively."
Mustafa Nadeem, CEO at Epic Research said, "The budget is likely to be what was presented as the Interim Budget. Various stakeholders have different expectations from Union Budget 2019. For taxpayers, the standard deduction can be reduced to Rs 40,000 while tax exemption limit can be raised to Rs 5 lakh. First and foremost is the liquidity crunch that is seen in the industry with the rising cost of capital resulting in a slowdown in the economy. Despite rate cuts, we are seeing a lag effect in passing on the benefit to the industry. The distress in rural demand and ongoing agrarian crisis is taking a toll on the sector. The DBT, Waivers, and Increase in short term loans up to Rs 1 lakh without interest for five years are some of the promises government made. Hence, a more detailed view and its implementation are important. In fact, it is critically important.
GST leakages should be resolved. Since there cannot be much change in tax slab, we believe this would improve the GST collection numbers. Rules and laws should now encompass a broader base to increase the GST numbers so that the government is able to improve its spending as it's now needed to revive the economy. Since the mandate is much bigger than 2014, hence, the expectations have also increased."
Romesh Tiwari, Head of Research at CapitalAim said, "Modi 2.0 needs new modified MNREGA type schemes to boost the rural economy and pump up consumption as early as possible. Attempts to achieve fiscal deficit target will deepen the crisis. I expect this budget to start a long-term policy for the development and growth of small and micro businesses which were badly affected after De-monetisation and GST. Investors, in general, are realising the need for immediate reforms to deal with the mess of bad loans piled up with banks and stalling investment cycle. It's time to move the Make in India concept from papers and put it up as a realistic long-term policy. The US-China tariff war is an opportunity that can immensely help the Indian manufacturing sector if this budget includes an investment-friendly policy and faster clearances for new manufacturing units.
Increase in government expenditure with a focus on reviving rural economy and infrastructure projects does not leave any room for reducing the fiscal deficit in this budget. Also, investors are expecting some reforms in the upcoming budget. For example, the slowdown in consumption is evident from all data coming in since demonetization. As the first budget out of 5 expected budgets, this government can afford to make a new long-term plan that starts from this budget and can be continued to provide a more inclusive and sustainable growth. With the mess around big bad defaults and the opacity of systems, the future will be more unpredictable unless the government makes them liable and accountable towards the investors' trust. A rising mismatch between availability of medical facilities and lifestyle-related chronic diseases is affecting a big proportion of the workforce. An affordable and widely accessible plan for public healthcare policy is expected in this budget.
It is high time to start implementing the plans that have the potential to start the process of an all-inclusive long term systematic growth. Hence, investor's community is looking forward to many bold steps and in case the government fails to address these concerns and tries to balance the fiscal deficit first, it will disappoint the community on a large scale."
Edited by Aseem Thapliyal