The long awaited package from the Finance Minister finally happened post trade on Friday. The impact will be known only on Monday but it surely has enough fuel to fire up the markets.
Tax reliefs happen finally
While the super rich tax still stays (with a promise to review in 2022), the FM has scrapped the additional surcharge on all forms of capital gains. This comes as a relief to DFIs and to FPIs that are structured as trusts. That should surely mollify the FPIs and boost the market sentiments. Secondly, the FM has finally done away with the highly controversial Angel Tax under Section 56(2)B, which will be a clear boost for start-ups.
Boost to NBFCs and MSMEs
These two segments were at the centre of the liquidity crunch in India in the last few months. The infusion of Rs.70,000 crore into PSBs will be done on a priority basis. The FM has assured greater MCLR based pricing of loans to ensure quicker transmission of rate cuts. In addition, the NBFCs will also be allowed to use the Aadhar based method of client addition to enable them to expand their client base in a cost effective way. For the MSMEs, the FM has offered a one-time settlement policy without impairing their future borrowing capacity. The FM has also announced additional support of Rs.30,000 crore for the housing finance sector, which is badly hit.
Boost for capital markets
With major infrastructure spending in the offing and with budget constraints, the FM has promised a quick deepening and broadening of the bond markets. Bond markets have been institutional for too long in India and surely needs a change. The FM has also taken steps to provide greater corporate access to global markets with a view to giving them a wider choice of fund raising platforms. However, the government has been largely silent on the sovereign bond raising plans due to the currency risk involved. In a bid to boost the equity side of the capital markets, the FM has simplified the Aadhar based KYC process for demat and MF investing. There will also be a rupee offshore market, which remains to be seen after the experience with Masala Bonds.
Auto sector measures
The one sector that represented the slowdown in consumption was autos. To begin, the FM has deferred the hike in one-time registration to 2020. In a surprising decision, government has given up its no-new-car purchase policy for government departments to boost demand for cars. The FM has also enhanced the depreciation on inventory from 15% to 30% till 2020 to make inventory build-up more viable. Apart from these measures, lower rates should also boost demand. A start has surely been made by the FM! ©