'Minimum Government, Maximum Governance'

Anil Pinapala Feb 02, 2024

The finance minister today announced a status quo interim budget, with no changes to the direct or indirect tax regimes. The government took steps to address the macro-economic pain points, with specific focus on promoting innovation, providing a friction free governance and expanding the benefits to the middle class, in the form of multiple policies and plans specifically on the lines of Buy or Build you home policy.

The 50-year near-interest-free loan for the Sunrise Sector, specifically showcases the governments commitment to promoting innovation.

This was also reiterated by the Finance-Minister in her speech for ‘Jai Jawan, Jai Kisan, Jai Vigyaan and Jai Anushandhan’.

We also appreciate government’s initiative to withdraw direct tax demands, re-iterating government’s governance philosophy of ‘Minimum Government, Maximum Governance’.

It is imperative that the government focuses on providing a frictionless governance framework, to promote innovation and growth.

The interim budget also focusses on promoting EV manufacturing and charging industry, Bio-manufacturing, Blue Economy Centric sectors and tourism sector. These initiatives can be drivers of growth for the next year.

While the government focused on incentivising the above sectors, BFSI, which is the backbone of Indian economy, was not touched upon much. There were BFSI related issues that were expected to be addressed in this interim budget.

Over the last few months, since several regulations were aligned for the NBFCs and banks, it was expected that the government would bring about a parity in direct tax regime specifically relating to deduction of provision of bad and doubtful debts.

While this was not addressed in the interim budget, it is something that would be expected in the July Budget.

Further, NBFC segment could have been provided with an active liquidity boost through institutions such as NABARD and SIDBI specially for the MSME segment. We also expected a partial credit guarantee scheme covering onward lending to the MSME segment.

This would not only strengthen credit delivery system and would help credit penetration in the MSME space. While this was not addressed and explicitly covered in the interim budget, we expect some coverage in the final budget.

To conclude, we believe that the interim budget addressed the macro-economic scenario and would propel India into the next phase of growth, there are some more nuances that the can only be commented upon once the final budget is rolled out.