There’s something for everyone in this Budget: (1) a moderately credible 4.1% fiscal deficit; (2) an infra focus (thrust, spend and financing); (3) Common man appeal—small tax and mortgage breaks; (4) FDI ownership—up to 49% in insurance and defence; (5) structural fix promises—subsidies (fuel and food); (6) business friendliness (tax and investment incentives); and (7) Some execution talk. This Budget will please a lot of people a little, and many (consumers, businesses, investors, analysts) will see it as a glass half full.
But there is no big bang, and the Budget takes little risk on contentious issues. These include (1) retrospective tax (committee resolution—no scrapping; (2) food/fuel subsidies—will re-haul, but is not specific; (3) land/labour laws—is not mentioned; (4) government bank ownership limits—ambiguous on whether the limits are being lowered, and few specifics on mining/asset auctioning. There is a reasonable argument that it is early in the government’s life to commit to specifics, some of this is not really needed (and not in the Budget in any case) or that market expectations are unrealistic. All fair, but excluding these, this Budget is not a radical departure from the norm, and there is a case to see this Budget glass as half empty.
There are many more winners—a few specific, others generic in nature. The bigger and clearer winners are (a) banks/financial services—across infrastructure funding breaks, opening up of insurance, savings incentives; (b) Infrastructure sector—direct spending, financing, focus and some policy; (c) Real estate—mortgage breaks, REITs, mass-housing and, of course, the common man—small breaks on income tax, savings, and in case mortgages. There are those that don’t get hurt as much as they could have (cigarettes), and there are those that miss out (oil reform, gold duty relaxation), but the largesse is fairly spread. The question is—if there’s almost no pain for any segment, how much will be the gain?
We believe a slowly upping economic cycle, market and capital risk appetite, and a Budget that meets (not beats) high market expectations is moderately market supportive. It does, though, shift the market’s next leg to real economic-activity/earnings or policy (beyond the Budget). We remain positively biased on the equity market.