The government has provided support to the banking and the Non-Banking Finance companies (NBFCs) sector in the form of allocation of funds, tax sops and allowed FPIs and FIIs to invest in debt papers of NBFCs. It is also backing NBFCs by incentivising PSBs for buying NBFC assets to provide liquidity with one-time six-month partial credit guarantee for the first loss of up to 10 per cent. This will result into higher credit growth.
The budget has also proposed income tax benefits to consumers such as additional Rs 1.5 lakh deduction in income tax on home loans under affordable housing and interest subvention of up to Rs 2.5 lakh on buying electric vehicles. This, along with simplified tax administration, will surely boost both urban and rural consumption, which, in turn, should fuel growth in the SME and MSME space.
In a major step aimed at easing the ongoing stress on India's non-banking finance companies (NBFCs), the government will lend a helping hand to top-rated entities.
The Union Budget has proposed that foreign institutional investors and foreign portfolio investors will be allowed to invest in debt securities by the shadow banks. This will allow the NBFC sector, facing a liquidity crunch, to raise more funds. The proposal to let FIIs and FPIs to invest in debt securities issued by NBFC would provide a much-needed boost of capital to a sector now starving of capital; an important prop to several sectors, particularly, real estate and automobile, which are reeling for lack of finance to purchasers/buyers.
This budget is the reflection of the strength and resilience of Indian economy. The results of digitization of taxation, GST and other structural policy decisions are showing in the macro indicators with widening tax base, higher tax collections, low inflation and good growth. It is good that government is passing these benefits in the form of tax cuts and direct benefit transfers to the common man. It will surely boost both urban and rural consumption which in-turn should fuel growth in the SME and MSME space.
(Rajiv Rattan is Chairman, Rattan India group, which is engaged in the power and finance sector. The views expressed are personal)
( With inputs from IANS )