INSUBCONTINENT EXCLUSIVE:
By Swarup MohantyIt was the longest Budget speech ever, lasting around 2 hours and 45 minutes
The early reactions to Budget have been focused on what should have been, could have been, what has not been, and how it has belied hopes
I think we should focus on what it actually has been, and how Budget proposals will have a long-term beneficial impact on the economy, and
particularly on the financial sector and the mutual fund industry
Within the constraints of a slowing down economy, the finance minister has chosen to announce measures aimed at furthering tax reforms,
giving a push to investment, meeting the aspirations of the people and uplifting demand.
She has remained firmly on the path of tax reforms
that she set out on in September, offering individual taxpayers the liberty of choosing between various exemptions or paying income on the
It is expected that people with an annual income of about Rs 5 lakh will benefit from the new tax system
What is more, this should also attract more people to mutual funds to participate in the capital market
With over 100 crore Aadhaar card holders, the instant allocation of PAN based on Aadhaar card, will also help in better penetration of
mutual funds.
Earlier, companies were required to pay Dividend Distribution Tax (DDT) on the dividend paid to its shareholders
Shifting the onus from companies to recipients to pay tax on dividend as per their slab will increase the attractiveness of the Indian
At the same time, small shareholders also stand to gain from this move.However the new personal income tax slabs could be negative for
investment in financial products like PPF, NPS and Insurance and MF ELSS schemes, and seemingly runs counter to the savings culture that
this government has been promoting
Another way of looking at it is that it could aimed at driving consumption with the secondary benefit of encouraging investments for the
purpose of wealth creation and not merely tax savings
Hence I believe that MF ELSS being a good wealth creation product might not be significantly impacted.Yet, at the same time the budget
catered to the requirements of the small savers and hiked the Deposit Insurance Coverage for depositors from Rs 1 lakh to 5 lakh per
This will instill confidence in depositors and increase bank deposits.The government is floating a new Debt-ETF consisting primarily of
This will provide retail investors another access to government securitiesThe government also proposes to sell a part of its holding in Life
Insurance Company (LIC) by way of Initial Public Offer (IPO)
LIC has an AUM much greater than the AUM of the entire MF Industry and will provide an interesting investment option for the retail
investor.Measures to invite sovereign funds to invest 100 per cent in Indian infrastructure too is a positive move as globally interest
rates are very low and significant amount of capital globally is looking at attractive investment opportunities.Budget 2020 is focused on
From a long-term perspective, the steps taken are in the right direction and ought to improve the standard of living of all the citizens
Budget was presented in a challenging domestic and global economic environment, and everyone expected big bang reforms such as personal
income tax cuts on the back of corporate rate cuts (from 35% to 25.2%) affected towards end September
As highlighted by the government previously, Budget should be seen as a statement of account, which needs to be reviewed every year, and
policy actions that are needed are on an ongoing basis
Therefore, the reactions to Budget should be proportionate
They may be small events in a long-term wealth creation journey, but they are building blocks laying the foundation for sustained
growth.
(Swarup Mohanty is CEO of Mirae Asset Global Investments)