The Budget takes a leaf out of the strategic direction to sustainable growth that has been penned by the Economic Survey. Thus, even with one eye on the fiscal consolidation, the government announced structural measures to boost employment – not only in terms of numbers but also quality, addressed the need to scale up MSMEs through credit facilitation to the sector – even for MSMEs that do not strictly have a formal accounting system. To aid small business, the mudra loan limits have also been enhanced. We believe that this is a budget for the longer term while near term consumption boost comes through providing benefits to income taxpayers. The Budget also promises structural reforms in the factors of production and use market forces to boost the growth story. Equity market participants may not have been happy with the Budget as the STT, LTCG tax rates go up. However, this was government’s way of casting its tax net wider. We see a reduction in the market borrowing programme by Rs 120 bn while net T-bill issuance is lowered by Rs 1 tn over the interim Budget. The reduction in the net T-bill issuance may aid domestic liquidity and push down short-term rates while long tenor rates may remain sticky.
