'That there are no surprises is a big positive'

'The fiscal pressure will be there, but the intent of the government behind this move is to spur demand and growth.'

Suresh Agarwal, MD and CEO, Kotak Mahindra General Insurance, gives Prasanna D Zore/Rediff.com his take on the Budget.

How would you critique the finance minister's budgetary proposals?

Let me start with the positives first. All-in-all, this is a positive, growth-oriented Budget with major thrust on stimulating economic activity. The fact that there are no surprises, in itself, is a big positive.

Usually, when you have the pressures (of managing) fiscal deficit, you typically see some amount of taxes going up, but that didn't happen. There was no surprise on this front and that was a big positive surprise.

From the fiscal prudence perspective, the overall borrowings of the government seem to be going up (for FY23). So, in that sense, the fiscal pressure will be there, but the intent of the government behind this move is to spur demand and growth.

The Budget's entire approach on capex spending that goes towards all the macro-growth drivers, digital economy, fintech, and all these to my mind are great positives towards driving growth.

Is it only the capex outlay that makes this a growth-oriented Budget?

What I like more about this Budget is the holistic approach beginning with capex outlay that is significantly high.

The ECLGS -- Emergency Credit Line Guarantee Scheme -- benefit for the entire micro, small and medium enterprises has been extended by another Rs 50,000 crore (Rs 500 billion) to make it Rs 5 lakh crore and will now be available till March 2023.

Then the extension of 15 per cent corporate tax on newly started manufacturing units for another year will surely help the MSMEs.

Then the income from transfer of digital assets (cryptos) will be taxed at 30 per cent.

The proposal to reduce surcharge on cooperative societies is also a positive.

The capping of LTCG surcharge at 15 per cent will also bring in more investments in unlisted startups.

Then all the proposals that boost infrastructure, housing, education, financial inclusion, healthcare and urban planning bring about all-round enthusiasm in every sector of the economy.

Specifically, for an industry like insurance, the mention of a surety bond -- a new concept for India -- opens up huge opportunities for GIs (general insurers) and project owners.

How realistic do you think is the estimated fiscal deficit target of 6.4 per cent of GDP for FY23 given that the government has overshot the 6.8 per cent FD limit for FY22 even if marginally?

All the revenue estimates that the government has shared look fairly reasonable and achievable. Look at the divestment figures for FY23 at Rs 65,000 crore (Rs 650 billion). They are very reasonable. Even all other tax figures highlighted by the finance minister look fairly achievable.

There is no revenue exuberance that I could make from the Budget.

Given these reasonable estimates one feels confident that the government will meet its fiscal deficit target of 6.4 per cent (of FY23 GDP).

While capital expenditure has been increased to Rs 7.5 lakh crore, the MGNREGA outlay has been lowered by 25.5 per cent at Rs 73,000 crore (Rs 730 billion). How will this impact consumption and demand in the rural economy?

The way I am looking at this is the outlay towards the entire housing sector spend including construction activity, affordable housing, rural housing the PM Awas Yojana will automatically spur demand in rural economy. This would automatically mean more jobs and economic activity in the rural economy.

To my mind, if the rural economy really picks up because of the measures announced in the Budget, it will automatically offset the deficit in MGNREGA job creation through activities in the housing sector.

Against the total estimated expenditure of Rs 39.45 lakh crore for FY23, the government expects to earn revenues of only Rs 22.84 lakh crore minus the borrowings.
How would this gap that the government plans to fill by borrowings from the market impact bond yields and interest rates in India?
If interest rates were to rise, wouldn't it dampen the animal spirits that the government plans to unleash through its capital expenditure outlay?

I would certainly agree that given the situation we are in, interest rate pressure would be there at some point on the industry (industrial activity). How the government will navigate this challenge will remain a critical area for the corporate sectors to observe closely. Even on Budget day, the 10-year government bond yield did rise signaling this concern.

Government will have to find ways to ensure that there is ample liquidity at reasonable rate for spurring demand and does not create inflationary pressures on interest rates as well.

Will high interest rates sustain for long? The answer is no. Given the way the deficit is looking like, in the short term I see interest rates going up, but how much of that will be offset by the other positives that the Budget will unleash will perhaps unfold over time only.

What role could the RBI play in controlling inflationary expectations in the economy or helping the government's borrowing programme for the next financial year?

Recently, the government converted all its short term borrowings into long term borrowings with the intention of not putting too much pressure on the market (borrowings).

I am sure between the RBI and the government they will ensure there is not too much pressure on the market from the interest rate and borrowing perspective at a given point in time.

To be very honest, it will be a tightrope walk. Given the global cues, there is only that much one can do to control interest rates directionally.

In my view, there is very high possibility of interest rates going up, but the intent of the government is to provide a huge thrust to economic activity. That, of course, will create its own set of pressures.

Let's see how the RBI and government will balance it all as we go along.

Isn't the 30 per cent crypto tax a conundrum?
While crypto currency is illegal, the finance minister has proposed to tax the proceeds from its transfer.
How do you tax illegal income?
If you do, doesn't it become legal then? If yes, wasn't it legal to begin with?

What the government is saying is if there is income arising out of transfer of digital assets, then it will be taxed. It is like a bet the government is wagering.