The dust has finally settled around budget before the battle cry is shouted ahead of the General Elections. It wouldn’t be wrong to say that this year’s has been the people’s budget. And after all these years, when the government’s focus has been on building a robust ecosystem, it is somewhat fair to beam the spotlight on the people for whom this ecosystem was being built for.

What’s special about this year’s budget is that even while being people-centric, the budget provides ample boost to the Indian economy at large. There are multiple takeaways from this year’s interim budget. There are also some shortcomings that must be looked into during the full-budget that comes later. Let us undertake a thorough analysis.

From An Economic Perspective:

Any budget must be primarily reviewed in terms of the overall economic impact that it generates, both in the short-term and the long-term. On these fronts, various positive developments can be observed. One of the key takeaways is that it has initiated a shift from the unsustainable ‘loan waiver culture’ which has currently beset our country. This is while ensuring that the needed relief is extended to our distressed farmers. All in all, Rs. 75,000-crore package has been announced for the farmers alongside an additional Rs. 20,000 crore in the upcoming year.

To provide the short-term relief, the government has pledged an annual grant of Rs. 6,000 for farmers having less than 5 acres of land. The long-term goals have been secured through interest subvention of 2% for the distressed farmers and an additional 3% subvention if loans are timely repaid. This is a very productive move for our banking industry which has been averse to the recent government-sponsored loan waivers. It will greatly improve the credit culture in the longer haul.

Secondly, the government has ensured that more money stays within the pockets of the tax payers. Indian taxpayers will now receive up to Rs. 12,500 thanks to the updated tax slab. Similarly, relaxations have also been offered on interest income from Rs. 10,000 to Rs. 40,000 in savings bank account and post office savings schemes. This can be seen as a move to increase liquidity within our banks and develop an investment habit amongst taxpayers. Though not directly related to the budget, the recent recovery done vis-à-vis NPAs is yet another positive advance for the banking sector.

It must also be noted that the broader framework of GST is quite sturdy. The tax evaders will be easily identified over the years once invoice matching kicks in. So, the losses that the government is currently experiencing via tax relaxations will eventually help it realize higher revenues by increasing the indirect tax net. This approach will also transfer its benefits to each and every stakeholder in the supply chain dynamics.

At present, there’s also a considerable income disparity in India. The top and bulging bottom of the pyramid are widely divergent. The Interim Budget will, to some extent, provide relief to the unorganized sector through the proposed pension for this segment. This can be considered as a good start as it will benefit small-time businesses including the otherwise excluded ones such as recharge counters, barber shops, etc. This will free up their working capital which was earlier locked owing to their post-retirement plans.

From the business perspective:

The industry was anticipating major reforms and adequate allocations from the Interim Budget. A majority of the proposed reforms are only in terms of how things are regulated. Though such reforms didn’t come up in the budget speech, the industry strongly believes that the full-budget that comes later this year will include them (give or take some).

What the government has offered the industry is an opportunity to maximize its business footprint by targeting the end-customers aptly. Ingenious ways have to be devised by players to fit themselves in the opening that has been created by the budget.

RBI, Government, and the Global Economy:

Something that didn’t come to the public domain during the recent tussle between the Indian regulatory and the Government is that there is a lot of volatility in the global market. There are multiple factors that are escalating the situation further which include the ongoing trade war and the likelihood of No-deal Brexit amongst others. The regulatory has also been apprehensive because crude prices are cumulatively increasing from the record-lows that it witnessed of late. And if these factors aren’t concerning enough, the more than 7-year long Bull Run of the US market – longest since World War II – must instill a sense of fear. Especially, when the importance of the US economy in the global trade is brought into perspective. The concern is that every bull market is followed by a bear market which, in other words, is a recession.

The reserves held by RBI provide it the much-needed buffer to absorb the repercussions of the economic turmoil. Though the government holds complete authority to demand funds from the central bank, as the latter comes under its ambit, these considerations must be taken into perspective and relevant safeguards must be built to prevent the fallouts. Economically, the current dispensation has been very prudent. So, it goes without saying that it must be taking this into consideration.

Lastly, Interim Budget has just offered us a glimpse of what we will be seeing in the upcoming full-budget. We are, to a great extent, assured that it will be much more than what meets the eye right now as the full-budget is tabled in the parliament later this year. All we can do right now is sit tight and eagerly wait for it.

About Mr.Manish Khera
An entrepreneur, an investor, a banker, an advisor, a movie buff and a heavyweight in the world of banking & finance; Manish is relentless when it comes to bridging the gap between big banks and the financial needs of the masses. Multiple innovation award winner, also Young Global Leader by the World Economic Forum, he is known for his entrepreneurship zeal & innovation at scale –Manish’s impact work has reached millions of Indian customers including at ICICI Bank, Fino Paytech Bank, Airtel Payments Bank and now ‘HAPPY’. HAPPY is a new age digital Fintech serving the requirements of micro-entrepreneurs and customers. India’s fastest growing Fintech and market leader in the segment

Related Post