The Finance Minister Nirmala Sitharaman announced the Union Budget today. Reviewing the budget, R. K. Gurumurthy – Head Treasury, Lakshmi Vilas Bank said “The first full budget of this Government has focus on almost all sectors and is growth oriented. The budget had to balance between reducing expenditure (or low carber deficit) and accepting a weaker growth. And under the circumstances, this has been done well. With both real and nominal growth still low, fiscal consolidation may have been impossible. Hence the utilization of the 50 basis room for fiscal profligacy. The guidance for FY 2021 is significantly predicated on successful disinvestment as tax collections are still sub-par.
Tinkering with the personal tax and some structural changes in the way DDT will work are cosmetic benefits that the small and medium investor will like. The worry is that there is no specific mention for bank recapitalization, which when read with RBI’s Financial Stability Report that NPLs could still haunt Banks in India, could raise concern and cripple the ability of banks to lend.
Bank depositors get a shot in the arm with the upward revision in deposit insurance cover. While this could mean some expenditure for the Bank, this would certainly give comfort to retail savers. Similarly, the proposal to amend Banking laws to strengthen cooperative banks should also infuse more confidence among savers. Gross and Net borrowings are marginally higher. Market may be able to absorb the incremental borrowing without much impact. Overall a compact budget”