Fiscal Deficit to Mutual Funds, Niraj Shah Predicts Budget 2018

With the annual budget set to make landfall on 1 February, expectations are on the rise.

From Long Term Capital Gains to Mutual funds, BloombergQuint's Markets Editor Niraj Shah tells us what to watch out for in Finance Minister Arun Jaitley's Budget speech on 1 February.

Slippage in Fiscal Deficit

Shah opines that Jaitley will stick to the script for the last Budget of this government, without any attempts at experimentation.

Talking about the projected fiscal deficit, which is expected to be 3.2 percent, Shah says that a slippage is predicted in the deficit.

Rumours say that there could be a slippage in fiscal deficit from 3.2 to 3.5 percent. Markets may be expecting such a slippage. But if the fiscal deficit increases, the market may not take it in a good stride.

Niraj Shah, Markets Editor, BloombergQuint

Focus on Long-Term Capital Gains Tax

The second-most important element is the long term capital gains tax, says Shah.

Rallying against its introduction in the Budget, Shah says that it could run the risk of being an over-populist move.

According to me, a continuity in policy, in which the taxation structure remains as the one promised and builds investor confidence, requires the absence of Long-Term Capital Gains Tax.

Niraj Shah

He adds that while the Budget could focus on the rural-agrarian sector, unnecessary spending may not "sit well with the market."

Rise in Mutual Fund Investments

As far as mutual fund investments are concerned, Shah is positive with regard to the possible Budget outlook in the sector.

Stating that a relaxation in mutual funds taxation could propel the already growing sector, Shah says that the it could boost confidence and benefit the markets.

Change in tax slabs would mean more money in the hands of small investors, which could be invested in mutual funds. Secondly, if taxation benefits, as covered under 80C, provide benefits in investments up to Rs 1.5 lakh, and if the limit is increased to Rs 2 lakh, it would increase investments. If every Indian invests Rs 10,000-15,000 in mutual funds, it would boost confidence and benefit the markets.

Niraj Shah

Adding that small investors need not worry about the Budget, Shah says that mutual funds are the best investment option for those with little knowledge of the markets.

Video Editor: Purnendu Pritam