The government took a bold step on raising the Capex target for the coming financial year even as COVID-19 put tremendous strain on the fiscal maths of the country.
The government’s expenditure on capital formation will rise 34.5 percent to Rs 5.54 lakh crore in FY22.
"The allocation of Rs 5.5 lakh crores in FY22 is a whopping 35 percent growth over the allocation in FY21 which clearly indicates the focus and thrust of the government. Moreover, the monetisation plans by encouraging INVIT structures and financing initiatives through the setting of development financial institutions is another positive move. Overall, the strong emphasis on infrastructure which is a long-term economic growth multiplier is positive," said B Gopkumar, MD & CEO, Axis Securities.
Apart from an increase in CAPEX, minimum government and maximum governance was a key highlight of the Budget that is deemed very important for a growing economy.
Naveen Aggarwal, Partner, Tax, KPMG India pointed out that a single Securities Markets Code is a step in the right direction to reduce overregulation.
"The FM also announced a hike in the FDI limit for the insurance sector to 74 percent from 49 percent by allowing foreign ownership with safeguards. The tax proposals too were crafted keeping in mind ease of compliance, certainty, dispute resolution, and reduce litigation," said Aggarwal.
The government has pegged the disinvestment target for FY22 at Rs 1.75 lakh crore. This will include the reduction of the Centre's stake in two state-owned banks and a general insurance company, and large-scale asset sales.
Gopkumar of Axis Securities said that the proposals for the financial sector which include privatisation of public banks and asset reconstruction company are significant positives for the financial sector. Overall, the budget has checked most of the boxes and will help the economy, he said.
Now, the implementation of the announcements is the key that will decide how the Indian economy will fare in the days to come."The government has also not been constrained by the fiscal numbers and has focussed on spending to get the economy back to its feet post the devastation of the pandemic. The key will be the execution of the plan. The divestment number will need a lot of work. The additional borrowing needs to be managed by RBI proactively to ensure that it does not impact the long-term rates significantly," said Amar Ambani, Senior President and Head of Research – Institutional Equities, YES SECURITIES.
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