While Budget 2019 continues to lay focus on infrastructure development, what sets this Budget apart is the attention given to financing of the outlay for infrastructure.
The Finance Minister announced on Friday initiatives for attracting more foreign investment both strategic and financial, deepening of corporate bond market, retail investment in Treasury Bills and Government securities as well as providing impetus to banking, capital markets, NBFC and insurance industry.
The Budget took the opportunity of building a vibrant corporate debt market through two major announcements. Introduction of tri-party repo has been a success for the G-Sec market and was recently introduced for corporate bonds by the exchanges to encourage trading interest.
To deepen the corporate tri-party repo market in Corporate Debt securities, it was announced that government will work with regulators viz. RBI/SEBI to enable stock exchanges to allow AA rated bonds as collaterals. These measures are likely to increase demand for corporate bonds and may provide a boost to much needed liquidity in the corporate bond market.
The Budget also paves the way for Foreign Portfolio Investors (FPIs) to have easier access to Indian markets by increasing the statutory limit for FPI investment.
FPIs will also be permitted to subscribe to listed debt securities issued by REITs and InvITs. This will give companies room to raise money from foreign investors while improving India’s weightage in the MSCI Index.
This Union Budget addresses the various pain points in the banking and financial sector as the country sees a slide in economic growth.
Rs 70,000 crore capitalization boost to the banking sector and enhancing competitiveness of Public Sector Banks through consolidation and governance reforms is a positive step.
The budget seeks to address the core issues of the non-banking financial sector by introduction of one-time six months’ partial credit guarantee to public sector banks for buying high-rated pooled assets of financially-sound NBFCs for first loss up to 10 per cent and also exempting NBFCs from the requirement of creating a Debenture Redemption Reserve (DRR) while raising funds through public issues.
We are happy to note that Government will be considering further opening up of FDI in Insurance while clearing 100 per cent FDI for insurance intermediaries. Furthermore, the government has relaxed the Net Owned Fund requirement for foreign re-insurers from Rs 5,000 crore to Rs 1,000 crore.
The government also intends to increase its foreign currency borrowings and a cumulative effect of all these proposals would ensure that India has enough funds to meet its infrastructural requirements.
The author is the president of the Federation of Indian Chambers of Commerce and Industry.