Jupiter: Positive signs from India

Budget announcement by Indian Finance Minister Arun Jaitley is a significant positive for the Indian economy, according to Avinash Vazirani, manager of the Jupiter India fund.

Coming after months of rumours about new initiatives that could penalise taxpayers, the many progressive steps contained in Jaitley’s third union budget will provide a lot of reassurance about the direction of travel for government policy.

The fact that the Finance Minister has focused on ensuring that the fiscal deficit remains the same, despite pressure from higher salaries and pensions across the board, is a good sign and my expectation is that a cut in interest rates is now even more likely.

The main takeaway is that this is an attempt to fix the economy and not the market. The government has signalled that it will continue to work through its key areas of focus, and will let markets take care of themselves.

The budget also marks a decisive shift towards progressive taxation, with a focus on rural India and the poor.

Biometric IDs will now extend to the food distribution system, cutting red tape and corruption while delivering money and services to those who need it.

There were also key developments in the tax sphere, where India has introduced an ‘equalisation levy of 6% of amount of consideration for specified online transactions received by a non-resident not having a permanent establishment in India’.

This is a simple way of framing a tax designed to prevent global internet giants from operating tax-free in India (Western governments take note!).

Overall I think this is a good budget for our portfolio and is likely to be positive for a number of sectors in which we have core holdings, including consumer staples and oil marketing companies.

Rumours circulating in recent weeks about extra taxation for the oil marketing sector have been quashed – if anything the new policies will benefit the sector.

Furthermore, given savings from low oil prices, there is no question of any further need to fund energy subsidies until oil reaches $55-$60 per barrel, in my view – a positive for the sector.

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