This is certainly a populist budget, which one would expect when general elections are just two years away. The government has cut taxes for people who vote for it. It has also provided special incentives for property, which is a very popular asset in India.
My sense is that the government has tried to recapture the vote bank, which I think it had lost after the fiasco with the currency in the form of demonetisation. I think the government made a lot of enemies with that move as many people suffered and many small businesses experienced losses.
I am not sure whether it was a good move but it was surely badly executed. So, through the budget sops, the government is trying to get the votes back.
I am quite pleased with the fact that the government has cut taxes especially for the low-income class and also for small businesses. On the housing part, while the government has changed the tax treatment a bit, it needs to make sure that it does not lead to any kind of housing bubble.
I am also extremely pleased and surprised that the government is looking at privatisation of Railways. I hope that will improve the efficiency of Railways and also attract capital to the sector.
The announcement related to political funding is a good move that will help clean up the political space though there are ways in which one can circumvent it. For instance, I can use 10 friends of mine who can donate ₹2,000 each.
One can clearly notice that there is certainly a war against cash. That way, a government can have more control if less cash is used. I am not a fan of high government control.
The main thing that I am worried about in the budget is the important issue of deficit. Indian debt continues to rise and will only rise going forward. The Finance Minister has increased capital expenditure by 24%, which India badly needs. But if he was really serious about the deficit issue then he would not have increased by so much.
India seems to be going deeper and deeper in debt. India is a developing economy and needs to attract capital and has to do something about its debt problem.
Another area where I was disappointed was that he did not open up agriculture. India historically has been an agricultural powerhouse and the government should seriously look at deregulating the agriculture sector so that farmers can prosper. If I was in his place, I would have opened up the agriculture space.
I am also disappointed that the government has not opened the currency market. It is 2017 and still the Indian rupee is not completely convertible. It seems that the government and bureaucrats still think that it is 1917 and not 2017!
The stock market has gone up though one needs to understand that it has been going up in the recent past. I think the market will cool down in the short to medium-term but that would also be due to global factors. Whatever happens in the global markets will impact the Indian market as well. There is nothing that India can do about it.
I do not have any investments in India and I am not going to jump in now as well.
It is still not easy for foreign investors to invest in the Indian currency, stock or commodities market. Even Russia, which was home to Lenin and Stalin, has a completely free market. In many aspects countries like China and Russia are more open compared to India.
So, while the government may stress on ease of doing business, I think it is a long way forward. I am not a big fan of Indian bureaucracy though I tell everyone that if there is one country that you should visit in the world, it is India.
Jims Rogers is an investment expert and author.
