Developmental populism
By Invitation Sunil Subramaniam CEO Sundaram Mutual

The budget speech took off with announcements around the agri and rural sectors. The government has found multiple ways to put money in the hands of the rural folks. This will give a massive boost to the rural consumption story. There’s also a provision for connecting 22,000 GAMs with the national agriculture market, for better market access and increased aggregation and rationalisation. Focus on the infrastructure sector continues as expected and the budgetary support of Rs 5.97 lakh crore in FY19 will be a big positive for the sector and supplementary industries such as cement. The focus of the government will remain on effective and timely execution of existing projects. One of the big announcements of the budget was the Ayushman Bharat Programme. Under the programme, a new Flagship National Health Protection Scheme, provides a health insurance cover of 5 lakh per family per year. The scheme will cover 10 crore vulnerable families, with approximately 50 crore beneficiaries. This is a big step towards universal health coverage making it the world’s largest healthcare programme. The government also announced that 150,000 centres for health and wellness will be created under Ayushman Bharat. These centres will provide primary and secondary healthcare focusing on non-communicable diseases, maternity benefits, diagnostics, and delivering cheap medicines. But it was towards the end of his speech that the finance minister addressed the elephant in the room —Long Term Capital Gains. While this may be disappointing from a market investor perspective, we need to keep in mind that the government has a fiscal math to balance and this is critical since a lot of income that was going outside the tax net has been booked by equity investors. Don’t make any knee-jerk reactions. The grandfathering treatment mentioned in the budget ensures all past returns are protected. The 10% taxation announced will continue to make equity mutual funds a lot more favourable vis-à-vis banks and corporate fixed deposits. The announcement on taxing dividends from equity oriented mutual funds will mean that asset management companies will have to come up with a plan on how to handle dividends going forward. Let’s remember this tax is for both dividend payout and dividend reinvestment options. On the whole, this is a balanced budget.