An important driver of equity markets is strong corporate earnings and GDP growth. We hope the Budget takes steps to address needs related to infrastructure development, as infrastructure can be a bottleneck if India is to sustain the current growth rates over a longer period of time.
Infrastructure investments required for India are estimated at $320 billion over the next 5 years. Funding this will definitely be a challenge, and we hope that the Budget will address some of this through creation of new schemes or instruments for directing long-term savings into infrastructure.
Also, suitable debt market reforms will be required for the same, especially in terms of innovative product structuring and creation of market depth. Pension and insurance sector reforms are also required, which we hope will be addressed in the Budget session of Parliament this year.
Considering the buoyancy in corporate tax receipts, we could see reduction in corporate tax rates, or at least a removal of surcharge on the same. A rework of the slabs for personal income tax could also be expected, where income below Rs 150,000 would attract nil income tax. We hope to also see a long-term vision for migration towards a unified Goods and Services Tax, as well as meaningful targeting of subsidies.
As far as the capital market is concerned, we hope that the Budget will not tinker with any rates related to STT or capital gains taxes. The current policy on both these taxes has proven to be successful for the Government, and we advocate a status quo on the same. This will also give a strong signal to investors on the issue of policy stability related to capital markets.
We advocate a hike in the limit eligible for deduction under Section 80 C in respect of contribution made by an individual towards specified savings instruments from the current Rs 100,000 to Rs 200,000.
This will ensure higher allocation of funds by individuals into these long-term savings instruments, and will encourage individuals to save to fend for their future needs.
It may be worthwhile to look at granting this exemption on infrastructure related bonds issued by banks and private entities to facilitate the spending on this vital area.
As far as debt mutual funds are concerned, the time has come to encourage more retail participation in these products though removal of dividend distribution tax on these funds.
Sanjay Sinha is Head - Equities, SBI Mutual Fund.
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