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RBI has more levers now than the FM to help NDA win the elections: Sanjay Sinha
Sun, Feb 03, 2019
Source : Citrus Interactive

The Interim Budget presented by Mr Piyush Goyal was a relief to the markets primarily because it limited rural largesse to Rs 75,000 crores in FY20. Three segments have benefitted the most from the Budget – landowning farmers, middle class families and the real estate developers. MNREGA allocation has been raised to Rs 60,000 crs and sops have been provided to the animal husbandry and fisheries segment within the agriculture sector via interest subvention and launch of schemes such as Rashtriya Gokul Mission, setting up of the Rashtriya Kamdhenu Aayog etc. The jury is out if the provision of Direct transfer of Rs 6,000 p.a in three instalments to an agri land owner who owns a cultivable land upto 2 hectares under the PM Kisan Samman Nidhi is sufficient relief or not.

 

Income tax rebate for income upto Rs 5 lakhs will cost the Exchequer Rs 18,500 crs but will cheer an estimated 3 crore tax payers. Allowing capital gains to be set off under Section 54 for the purchase of up to two residential properties from the present one is a welcome measure and is in line with the rising aspirations and actual practical need of typical middle income families. Exemption of notional rent on a second self-occupied house is also consistent with the aforesaid proposal.

 

The Budget now allows Developers not to pay rent on unsold inventory for upto 2 years instead of the earlier one. The benefits of affordable housing under Section 80 – IBA has been extended for projects approved till 31st March 2020. Though apparently small, these measures are surely going to lift the sentiments in the real estate sector.

 

The Government clearly wants to spur consumption in the economy and is doing its level best given the fiscal constraints. However, we need to take note of an important shift in the economic behaviour of the Indian population. It is now increasingly leveraging and buying everything – whether it be car, mobike, house or even washing machines. This has been supported to a large extent by access to credit from NBFCs, at reasonably affordable rates. Post the ILF&S fiasco the liquidity squeeze on incremental lending by NBFCs is already reflecting in the sluggish auto sales numbers month on month. The Government badly needs a feel good factor in the run up to the election. A Rs 6,000 in the bank account will not make a farmer as happy as being able to buy something worth Rs 60,000 or more and use the Rs 6,000 to pay the interest or EMI on it. The ball is therefore in RBI’s court to keep rates low and NBFCs well-funded. We’ll get to know whether this happening between 5th to 7th  Feb’19 when the MPC of the RBI meets next.

 
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