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By Mr. Nitin Sharma , Director, Research & India Site Head - Fidelity International

The budget is growth-oriented, with the key highlight being the 35% higher government capital spending target on an already high base. The Finance Minister has focussed on putting in the critical multipliers to create a more sustained growth cycle rather than just a one-off impact. The capital spending spree covers rural and urban areas and will touch several sectors, including housing, construction, engineering, metals, auto and technology. Extension of schemes such as ECLGS will also support MSMEs across the spectrum.

There were widespread expectations of some measures, such as tax cuts to support consumption, which did not come true. However, the growth bias was needed as we navigated our way out of the pandemic. The higher capital spend will eventually flow into the hands of all economic activity participants, including the private corporate and their workforce. The higher government spending, measures, ease of doing business, and “Make in India” theme will help kick-start a broader private capex cycle. Also notable is the thrust on social infrastructure - education, healthcare, and housing. It must be noted that the FM is looking to partly fund the government capex through a higher fiscal deficit apart from relying on a strong direct tax momentum, which will put upward pressure on yields.”

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