The spectacular "green" signal given by the markets to the budget is a clear evidence that this is a budget for nation-building. The government has re-affirmed its commitment to taking the reforms forward, and despite the aberration due to COVID-19, is steadfastly focused on running the course of making India a $5 trillion economy.
Demand as well as capital creation - complementary themes - run central to all announcements by Finance Minister Nirmala Sitharaman. The catalyst for this growth would be capital markets, financial sector and those have also been strengthened.
Bold measures have been proposed in the budget, such as privatisation of two public sector banks and a general insurance company in this fiscal, higher FDI in the insurance sector, exhibiting India's confidence to be globally competitive.
FICCI had recommended setting up of a National Asset Management Company (Bad Bank) for one-time resolution of large non-performing assets. FM's announcement to relieve banks of NPAs and thereby the requirement of high-level of provisioning would introduce transparency in handling of NPA accounts, not to mention freeing up banks' capital for more productive uses.
The proposed Asset Reconstruction Company and Asset Management Company, which will take over the existing stressed debt, will also attract foreign investment that focuses on stressed assets. This will ensure optimal value realisation of those assets with the benefit of professional expertise. A win-win proposition for all stakeholders.
FICCI also welcomes the announcement of setting up of Development Finance Institution (DFI) with seed money of Rs 20,000 crore, targeting a lending portfolio of Rs 5,00,000 crore over the next 3-4 years for financing the planned infrastructure outlay that will churn the wheels of our economy. We see funds flowing in from sovereign wealth funds and other long-term institutional investors.
While India boasts of a vibrant equity market, its corporate bond market needs focused attention. A mature bond market is the sine qua non for infrastructure financing, corporate growth and also for relieving banks as sole-debt providers to businesses.
The announcement to set up a permanent institutional framework for promoting the bond market as a viable option for raising finance is indeed praiseworthy. Over time, retail participation will reap the benefits of this risk-free, stable, fixed income investment option, which will in turn promote liquidity in the secondary bond market.
To provide a fillip to the financial services sector in India, the government had established an ambitious International Financial Services Centre in Gujarat. The Centre has the potential to rival established international global financial hubs in London, Singapore and elsewhere.
With the development of a world class Fin-Tech hub at GIFT-IFSC, as announced in the budget, global opportunities will be provided to India's burgeoning, high potential, fin-tech companies, moving the needle in their favour. India's fin-techs are providing commendable financial solutions through data analytics and artificial intelligence.
Also, offering additional tax incentives to IFSC such as tax holiday for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors will prevent export of India's business to other countries. Job creation for India's skilled, finance-literate and tech-savvy young population would be another advantageous outcome.
In a bid to unlock gold as an asset class, the government had committed to instituting a system of consumer-friendly and trade efficient system of regulated gold exchanges in the country. With notification of SEBI as the regulator, global credibility has been provided to the regime, also paving the way for better price discovery and the option of global contracts in the precious metal.
The 'eye on the future' budget also has a sharp focus on improving the ease of doing business quotient and instill confidence in private investors. Not only does it include a special administrative structure for 'Ease of Doing Business' for cooperatives, a conciliation mechanism for quick resolution of contractual disputes is also proposed.
The proposed updated version of the Ministry of Corporate Affairs' (MCA) portal, which will enable e-scrutiny, e-adjudication, e-consultation and compliance management, is noteworthy as MCA portal has won many accolades for reducing time and cost of ensuring multitude of compliances since inception.
While the budget scores high on many commendable and path-breaking proposals, the key lies in successful implementation of the vision.
There are many successful international illustrations and precedents of these frameworks; however, designs would need to be adapted to our requirements and specifications.
(The author is Secretary General, FICCI.)