Budget 2020 is a Balanced Budget under circumstances: Nirmal Jain

On the whole I think the Budget by the Finance Minister is a mixed bag, primarily because expectations were too many ?few things have been addressed and few have not been. Market has reacted sharply today because foreign investors would not have been there. But I am not so pessimistic and I think under these circumstances, this is a balanced budget.

Since in the run-up to the Budget there has been a lot of discussion about the economy slowing down and the government being sensitive about it, people thought a lot more would be done to kick-start the economy. The market expected that there would be some exemption on LTCG, something more concrete for banks, which didn?t happen. For insurance sector the disappointment is because so many exemptions and deductions are taken away. If the idea was to make income tax simple without any deductions and exemptions then it should have been lowered much more. It should have been dramatic like it happened for corporate taxes, but this is gradual so the benefit would be muted.

Also when there is a plan to do an initial public offering for Life Insurance Corporation of India, then the biggest incentive which has been driving savings into life insurance investments should not have been taken away. Things also look complicated due to the option of using or not using exemption benefits.

However, on the positive side, there are a few things like removing criminal clauses in companies act and many other acts, also the Vivad Se Vishwas scheme to do a trust based thing are positive moves. Also government has kept its focus on rural, agriculture, infrastructure while not going overboard in terms of fiscal deficit. They are trying to keep it within the Fiscal Responsibility and Budget Management (FRBM) leeway provided. So, I would say it is a balanced act given the circumstances.

Little for private investment
There is very little for the private sector investment. In fact, while the dividend distribution tax has been taken away, which helps foreign investors, the domestic entrepreneurs and promoters are penalised on their profits twice because first they are taxed as company and again taxed on dividends, which in a way is a retrograde step because profits should taxed only once. You could have a higher tax rate that is acceptable but what is happening is that entrepreneurs or investors who reinvest in ventures and drive jobs will be discouraged with this double taxation.

While housing for all by the year 2022 has been the stated mission of the government, unfortunately the tax paid on the exemption for the housing loan is taken away. This may not be good for the millennial or first time home buyers, particularly when interest rates are high. So, I think there are few steps that might work as a counter to what government objectives are like flow of savings into insurance or home loan tax benefits for new buyers. It is possible that during the course of the discussion on Budget some of them may be addressed. But, in the short-term it may not augur well for investment in affordable housing by the end user and also the flow of savings into the financial sector which are more productive.