The budget should be followed by a decrease in subsidy in tune with budget estimates
Nimesh Shah – MD & CEO, ICICI Prudential AMC
The Union Budget 2012 has been a tight ropewalk between triggering a roadmap for fiscal consolidation and managing development & popular sentiment. The increase in Service Tax by 2% and an increase in excise duty were anticipated and have resulted in some fiscal respite. The introduction of the Rajiv Gandhi Savings scheme is a clear positive for the equity market by way of increased long-term investor participation. In addition, reduction in STT on delivery by 20% has added to the investors return potential for equity. Going forward the budget will have to be followed by a decrease in subsidy in tune with the budget estimates. The market will require the government to take the fiscal consolidation roadmap ahead with possible increase in oil/ petrol prices, which will be crucial to providing RBI headroom for significant rate action. Until then it is over to affirmative execution by the government.