Despite constraints,a reasonable Budget

Stock markets,however,tend to overact and often behave irrationally. Being the UPA’s last full Budget before the general elections in 2014,market expectations were high. Given that there were no so-called ‘big bang’ reforms,the markets expressed their disappointment. Hopefully better sense will prevail and the negative market sentiment will soon abate.

The FM has rightly recognised the huge multiplier effect that housing has on the economy. Housing is the second largest employment generator in India and has strong and backward linkages to over 276 industries,with the core ones being steel and cement. The Budget has endeavoured to encourage home ownership and the additional fiscal incentives on home loans is a welcome measure.

Currently,interest up to Rs 1,50,000 per annum is deductible on a housing loan. The Budget has provided an additional deduction on interest on a home loan up to Rs 1,00,000 p.a. for a first time home buyer for assessment year 2014-15. To avail this benefit,the limit on the home loan sanctioned is Rs 25 lakh and the property cost is Rs 40 lakh,which is very reasonable and caters to the affordable housing segment.

The other measures to boost housing include the increase in the Rural Housing Fund to Rs 6,000 crore and the introduction of the Urban Housing Fund of Rs 2,000 crore. Both these funds would help housing finance companies in terms of availing refinance.

As regards the capital markets,it was a bit disappointing that there were no decisive measures to increase retail participation,barring the liberalisation under the Rajiv Gandhi Equity Savings Scheme. Clearly,more measures are needed in order to increase financial savings.

On a positive note,the streamlining of the registration process and KYC norms of foreign investors is a welcome measure. Further,efforts to remove the ambiguities pertaining to what gets classified as foreign direct investment (FDI) and foreign institutional investors (FII) is a step in the right direction. The proposal of the FM to move towards internationally accepted norms,where an investor stake in excess of 10% would be considered as FDI,while a stake of less than 10% would be considered as FII will help simplify investments.

While the increase in the surcharge for high net worth individuals and companies is a compelling revenue enhancing measure,it is equally important to recognise the need to widen the tax base. Fortunately,the FM has desisted from introducing inheritance tax or estate duties.

In conclusion,the FM has presented a reasonably sound Budget,through efforts to regain investor confidence,create a fresh investment pipeline and resolve policy logjams remain the key challenge.