Budget 2021 Live: Big Spending Budget, Very Slow Fiscal Glide

In an interesting move the Finance MInister has reduced the rate of Basic Customs Duty on a whole host of items while levying a new Agriculture Infrastructure and Development Cess on them. The FM says reasons are twofold, they want to collect additional funds for agri infra, without increasing the tax burden on consumers. Effective impact on each of these items has yet to be computed.

PS: Cess revenue is not shared with states.

The Bank Nifty-led uptick in markets today shows just how strongly investors believe it the budget is positive for banks and NBFCs. Jefferies says the budget stimulates growth/ capex, even if expansionary in nature and that is positive for banks, and the focus is on recap of PSU banks, resolution of stress/privatisation of PSUs as well as set-up of capex-financing vehicle, the timely execution of which is the key. It it not everyday that you see that the Bank Nifty gain 8%, its best performance since April 2020.

The Sensex thus got buoyed up by 5% points, the best budget day gains since 1997. Autos, metals and other high beta have bounced alongwith banks, with defensives like IT and Pharma sulking in trade. While the benchmarks did well, the broader markets did well too, with the top 10 gainers on the Nifty 500 clocking in double digit gains, and the space again being dominated by financials there. While there were individual losers like stainless steel companies, the larger picture is of a growth-focused budget, one which can help in the recovery in 2021.

The government has pegged the FY22 fiscal deficit at 6.5% of GDP or Rs 15.06 lakh crore. But market borrowings at about Rs 12 lakh crore.

How? For one, there is a big increase in the reliance on the National Small Savings Fund.

• In FY22, the government borrowed Rs 4.8 lakh crore from the NSSF compared to the planned Rs 2.4 lakh crore.
• In FY21, the government will borrow Rs 3.9 lakh crore.

By Niraj Shah

Equity markets spiked as soon as the FM speech ended. Phew! No bad news, was probably the sentiment.

The reading also is that there are several measures to simplify business challenges, including changes to administration of direct taxes while increasing compliance. The biggest positive seems to be that there are no negatives like taxes on the ultra-rich, no Covid cess or any tinkering with long term capital gains tax.

So you got a budget with no bad news, ease of doing business and a focus on growth. With that, an index which has corrected 6.5% over the last ten days, is shooting up on a day when the rest of world is also rising.

By Menaka Doshi

Just under 2 hours. So that was quicker than what most of us had expected.

No big tax changes announced in the speech.
Not clear on fiscal glide path yet (see post below).
Waiting for budget documents.
Taking a break for a bit.