Union Budget 2015: Highlights and Views

Snapshot of the Budget 2015
The Finance Minister delivered a tepid budget where everyone was hoping for a path-breaking budget or "super budget". The Finance Minister, Mr. Arun Jaitley remained committed to the path of fiscal consolidation, although the expected deficit for next year was more than what the markets hoped to see.

Here is a snapshot of those parts of the budget which are pertinent to you, as an investor. Our fund managers have also given their views on their individual asset classes and the impact that this budget has had on them.

Our verdict – a typical budget which outlines the growth path for India till 2020, nothing path breaking or sensational.

Highlights of the Budget:

For the Economy

For You

Budget views

Equity
There were some high expectation from budget and it has not lived up to that. On the positive side, there have been measures to increase infra funding as well as implementation of projects. Corporate tax rates are proposed to be reduced by 5%, and many of the exemptions will be taken away. The effective rates will actually increase for corporate India as a whole-although some specific companies may benefit from lower taxes.

There has been social and rural spending. Measures have been announced on tackling of domestic as well as off shore black money in-line with promise made by the government earlier. However, fiscal deficit targets have been postponed and government maintains to introduce Goods and Services Tax (GST) by the start of April 2016. GAAR has been deferred, as was expected. There have also been benefits announced which will help SMEs. It wasn’t a “dream budget” or a “super budget” as was made out by markets or media.

Debt
The fiscal deficit target has been modified to 3.9% in 2015-16, 3.5% in 2016-17 and 3% in 2017-18. The previous targets was 3.6% of GDP and 3% levels This is due to 14th Finance Commission recommendations. 62% of the central revenue would now go to states from 52% level. The revenue deficit is targeted at 2.8% of deficit for the current financial year. Finance minister has accepted the monetary policy framework of making RBI responsible for maintaining CPI inflation below 6% levels. The finance minister also expects CPI inflation to be around 5% in the current financial year.

Gold
In some way, measures like introducing the gold monetization scheme, the sovereign gold bond etc. serve as a useful link towards monetizing gold/curtailing gold demand. However, there are a few concerns on the successful working of the scheme. A gold bank/corporation dedicated towards this task should have been setup to ensure smooth implementation/functioning of the gold monetization program which was missing in the announcements. There have been several gold monetization schemes launched over years but none seem to have been close to the desired objective. The success would depend on various factors most importantly interest rates offered on gold metal accounts and the sovereign gold bond. The current interest rates of close to 1% are not enough to incentivize holders to part away with their gold. Something like 5-6% interest rates are likely required to entice investors.

Conclusion
To conclude, we believe that the Budget is a decent attempt by the FM to chart a growth path for the economy, which had been stagnating in the past. However, as the FM has laid out a fiscal path for the country, as investors, we need to plan our household budgets just as well and must remember to be focused on our long term fiscal goals.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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