27 Jan 2021, 10:39 — 4 min read
The Union Budget will be presented on 1 February 2021. And here are my thoughts on some of the issues the budget is likely to address.
There is a good chance for the finance ministry to sweeten the budget at a household level.
What are the pressing issues in the economy that will need to be solved?
Will the Finance Minister deliver on this?
Well, odds are not in favour, however, nothing worthwhile comes easy.
Let’s begin by understanding in the context of Small and Medium Businesses. Cashflow is improving gradually, demand is getting back on track and the bank loan is payable in an easier manner. However, savings is still an issue and new businesses are still facing challenges.
What are the things that can be done?
Markets are on a high and disinvestment makes sense from a sentiment point of view. The trick as usual is to decide which companies will stay eligible and which ones will come this year. As not much is expected till March, we might see a situation where disinvestment matters only next year. Major ones of LIC and BPCL are likely to happen towards the end of 2021.
It doesn’t seem likely that the government will put money in the hands of the people as the economy is recovering without support from the government. The lockdown strategy appears to have worked if we don’t see a further lockdown.
If the second point does not trigger, then GDP growth in the region of 5-6% per annum seems achievable.
Real estate seems to be coming back particularly in certain areas where stamp duty also has been reduced making it an attractive deal for many on-the-fence buyers. If the interest availed under taxation is increased then we are likely to witness a rise in real estate. This needs to go up from Rs 2,00,000 to Rs 3,00,000 as this sector creates a multiplier effect on the demand side.
AMFI (Association of Mutual Funds in India) has been proposing an addition of a debt savings scheme for quite some time now. However, it has not met with success so far. This apparently appears doable as there is a twin benefit of deepening debt markets and no additional outgo of taxes.
The problem with this is that it is done piecemeal and is there for a limited period of time. If it is done as a tax policy for a couple of years then more funds can be raised through this route along with providing a tax benefit.
Debt fund investors enjoy the benefits of indexation whereas the city cousin equity is getting unfair treatment. If brought in line this enables the creation of a new investor class over a period of time.
Well, all of us have our demand list from the Finance Ministry. Let us see how it goes.
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Posted byAnirudh Anand Gupta
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