Friday, February 29, 2008

Budget headlines

So the FM has presented a partly populist budget as some quarters feared. The populist fare dished out on the agricultural loan waiver was viewed as a big negative and also its effect on the bottomlines of PSU banks. However the budget says that it has provided for the write off so this might mean that PSU banks do not get impacted. The fine print will have to be studied.

On the positive front, the FM changed the individual income tax slabs to give a considerable tax break. The take home pay of India's middle class has gone up and this should increase consumption and savings as well. Good news for industry and the financial sector as well (though the short term capital gains tax increase put a dampener on celebrations - my view is that is will curb speculation and encourage investment, which is good).

The reduction in excise duty on things like small and hybrid cars also spells good news for the middle class and the automobile segment. In addition, a whole list of consumer products from footwear to plasma televisions have got cheaper. All this should aid the consumption story which should drive production and eventually the capital goods industry as well.

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