- Mr Market
- 11-Jul-2014
Budget 2014- Baby steps towards the grand Indian vision
Set against the backdrop of years of misrule by the previous government, slowing growth, rising inflation and a weak monsoon, the Finance Minister's job was indeed a tough one. Budget 2014 was devoid of any populist announcements, a welcome change from the usual Robin Hood exercise carried out by the previous government (taxing the rich and distributing freebies to poor).
The focus was clearly on fiscal consolidation and improving the delivery mechanism. As an illustration, allocations to subsidies and MGNREGA remained constant but there was focus on overhauling the subsidy delivery mechanism and improving the work quality of MGNREGA. This is precisely the kind of budget that our stalled economy needs - calibrated on expenditure and focused on improving the policy implementation and job creation. Prospero Tree opines that the baby steps taken in the Budget, if implemented in true spirit, will propel the Indian economy to a higher growth path.
What's the direct impact of Budget on you?
While the budget doesn't change your life materially, it will make you richer by ~Rs. 10,000-30,000 through tax savings. Personal income tax slab has been revised upwards from Rs. 200,000 to Rs. 250,00 while investment limit under 80C has been revised from Rs. 100,000 to Rs. 150,000. The exemption in interest paid on housing loan has also increased to Rs. 200,000.
Another impact of the Budget is that cigarettes and soft drinks will be more expensive while electronics, soaps and footwear will be cheaper.
What's the indirect impact of Budget on you?
The Budget was balanced enough to touch upon most of the agendas of Narendra Modi's blueprint - smart cities, irrigation and uninterrupted power received an allocation of Rs. 70bn, Rs. 10bn and Rs. 5bn respectively. These agendas if pursued diligently will generate enormous employment and business opportunities. India's growth story can revive and this could mean better jobs, pay hikes and living standards for you.
Prosper Tree view - How to benefit from the budget?
The only big way in which you can benefit from the Budget is through owning stocks of companies that can benefit from the Budget announcements. The long term government focus on smart cities, irrigation and infrastructure will create many winners in the corporate space. The specific sectors and stocks that will benefit from this Budget are:
- Thrust on affordable Housing - LIC Housing, Repco Home Finance and Gruh Finance
- Simpler regulations for infrastructure financing - IDFC, PFC and REC
- Lower than expected duty hike on cigarettes - ITC
- Irrigation and river linking - Jain Irrigation, EPC Industries, KSB Pumps, Shakti Pumps
At Prospero Tree, we believe that investing is a continuous process rather than an event-based process. We identify sectors and stocks that can multiply in value over the long term. Watch out for our stock recommendations to benefit from the India growth story.