The Budget is delivered against the backdrop of high expectations from the Finance Minister, after the concrete steps taken by him to revive the economy in the last five months as well as his overseas FII roadshows.
The Budget meets the basic criteria of adhering to the stated fiscal deficit targets of (5.2 per cent for FY12-13) and (4.8 per cent for FY13-14) after accommodating reasonable increase in Plan and non-Plan expenditures.
Stiff targets
The gross and net borrowing figures of the Government appear manageable and will improve the scope for private sector borrowing in the coming year.
The divestment target of Rs 40,000 crore and telecom receipts of Rs 40,000 crore, and a huge jump in dividend receipts from Rs 25,000 crore to Rs 45,000 crore are difficult to achieve.
The special investment allowance of 15 per cent is aimed at reviving the investment cycle in the economy. At the same time, introduction of GST and PPP in coal mining are needed to revive the economy.
The special thrust given to the capital markets revival in the Budget as also simplifying the procedures for investments by FIIs are positive steps.
The 5 per cent additional surcharge on corporate profits above Rs 10 crore will have an impact on the earnings growth, but it seems to be a necessary evil at the same time since the Finance Minister has clarified that it is only for a year and the market should not take it very negatively.
Reviving growth
All the markets (equity, bonds, currency) have reacted negatively, but under the given constraints, it is a good Budget and can potentially open the doors for the RBI to reduce the interest rates, further helping to revive the growth.
Auto and financials look interesting sectors, followed by select capital goods/infra and consumption stocks. The Rs 1 lakh additional housing interest exemption will further help revive the real-estate sector as well as all the ancillary sectors such as steel and cement.
Lot of emphasis has been given to revive the infra sector with the announcement of new projects as well as the constitution of an Infrastructure Board to clear the dispute hampering the completion of already initiated projects will also be positive for infrastructure sector.
(The author is Joint Managing Director, Prabhudas Lilladher Group.)