What mutual fund executives want to see in upcoming Union Budget

Debt taxation

From 1 April 2023, debt mutual funds have not got the benefit of indexation on long-term capital gains. Such gains are taxed at the slab rate of the investor.

“We expect that debt mutual funds will get some benefits to attract retail investors," said Nilesh Shah, managing director at Kotak Mutual Fund.

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“Changes in tax policy for debt funds in recent months might also be reconsidered, reflecting the government's adaptive approach to economic conditions. Overall, these measures aim to create a balanced, growth-oriented budget that supports both rural and urban sectors while simplifying tax obligations to enhance economic efficiency and consumer spending power," said A Balasubramanian, MD and chief executive officer at Aditya Birla Sun Life Mutual Fund.

Infrastructure push

Mutual fund executives expect continued and increased focus on infrastructure. Their view is that infrastructure development would serve as the foundation for sustained economic growth.

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“Infrastructure development will remain a priority, fostering the right ecosystem for progress and aiding in consumption growth. This infrastructure focus includes not just traditional projects but also initiatives that stimulate consumer spending. There is noticeable growth in consumption across various sectors, reflecting improved economic conditions," said Balasubramanian.

“Improved focus on rural development and infrastructure will have a rippling effect on employment and consumption. This will benefit the economy in the long term," said Anil Ghelani, head-passive investments and products, DSP MF.

Consumption

“The budget should continue the excellent work on account of fiscal prudence. A tax cut or enhanced allocation to the rural economy will support consumption at the mass market level," Shah of Kotak MF said.

The executives place significant emphasis on the need for increased focus on rural development.

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“Everybody wants to see some continuity. The industry will closely watch what the government does to improve rural demand, which has been neglected," said the chief executive officer of another fund house.

Capex and fiscal consolidation

Experts expect an improved approach to capital expenditure and fiscal consolidation to help with long-term economic growth.

“We are not expecting any major structural changes in this budget as the government has already set the stage with capex of ₹11 trillion. This is the highest-ever capex outlay in history. Now the government just has to bring improvements with a key focus on fiscal consolidation," said Ghelani of DSP MF.