Budget 2024 focusses on fiscal prudence, says Nilesh Shah

Budget 2024: Nilesh Shah, Managing Director of Kotak Mutual Fund, has commended the Union Budget for 2024-25, describing it as a well-balanced plan that achieves the "trinity of the impossible": fiscal prudence, investment, and consumption boost through employment generation.

Shah highlighted the government's achievement in reducing the fiscal deficit from 5.8 per cent to 4.9 per cent, stressing on fiscal prudence. He noted the substantial investment of Rs 11.11 lakh crore, which aims to stimulate economic growth. Shah also pointed out that potential divestment and increased tax buoyancy, which are not factored into the current numbers, could further improve the fiscal situation.

Shah praised the budget's focus on job creation, which he believes will boost consumption. "This budget achieves the trinity of the impossible: fiscal prudence, investment, and a boost to consumption via employment generation," he said.

Addressing the stock market, Shah acknowledged the froth in low-floating stock counters and concentrated holding companies. He expressed concern about the losses incurred by most investors in futures and options (F&O), attributing profits to those with superior computing power and algorithms. He supported the increase in the Securities Transaction Tax (STT) as a step in the right direction to bring F&O activity under control.

Shah welcomed the rationalisation of tax slabs across real estate and equity. He praised the simplification of real estate tax rates from 20 per cent to 12.5 per cent, noting that any simplification is positive despite some winners and losers. However, he pointed out the need to address discrepancies in capital gains tax treatment between foreign and local investors, particularly regarding derivative markets.

Shah stressed on the importance of incentivising proper investment habits. He expressed concern over the high percentage of household savings allocated to low or negative real return products, such as currency notes. He advocated for tax incentives to encourage investments in higher real return products like equities and high-yielding debentures.

NPS Vatsalya Initiative

Shah also praised the NPS Vatsalya initiative, which allows parents to set up National Pension System (NPS) accounts for their children. This initiative aims to inculcate long-term investment habits, with the potential for a newborn to have 60 years of investment in NPS.

Shah concluded by expressing his confidence in the budget, describing it as a strategic plan that balances fiscal prudence, investment, and consumption growth while fostering sustainable development.