Daily Voice | This CIO explains how Centre can achieve its divestment target of Rs 61,000 crore

Do you think the government has provided enough lever to the private sector in the Budget 2023?

Budget 2023 continues to focus on strong capital formation which has been a key feature of last few years’ budget. An outlay of Rs 10 lakh crore, up 33 percent would create a multiplier effect and put India's economy on a growth path. Capex boost was much needed and the figures announced surprised everyone positively especially when the private sector demand may be slowing in the coming year amid weakening export demand and rising cost of capital.

With massive increases in railways and road infrastructure the focus is clearly on increasing productivity and reducing costs & attempt is to make the environment more conducive for private sector investments to pick pace.

Do you think the government has delivered strong budget considering the current global environment and will the economy outpace other global peers in coming years? What is your rating for the budget on the scale of 1-10?

I think considering the tight global liquidity and geo-political concerns and weak growth environment, the budget has ticked all the right boxes when it comes to stimulating consumer demand through higher disposable income, stimulating economic activity through massive capital expenditure outlays and balancing fiscal deficit in the process.

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I am of the view that this is a very smart budget wherein expenditures have been aligned very cautiously and income sources have also been tapped. I would rate the budget as 9/10 considering it has been a bit harsh on the top tax payers in the society indirectly.

What is the larger message you take away from the Budget and Economic Survey? Is it really a clear road map for several years?

Biggest message for me is the firmness shown in sticking to the path of fiscal consolidation while maintaining a capex push and providing tax benefits to the middle-class to support consumption. In my view, key fundamental metrics for evaluating any budgetary exercise would be to see how much money the budget is leaving in the hands of the general public and how much is the size of the fiscal deficit & in my view Budget 2023 does a fairly good job on both of these parameters especially given the weak global macros.

Government continues to prioritize a long & difficult but more viable route of growth through rising capital investments. Investments led growth will lead to higher incomes and boost consumption over time. Over a course of last few years government has reduced corporate tax rates, provided tax incentives to foreign capital, raised customs duty, rationalized GST, simplified taxation and is encouraging make in India through various PLI scheme as well as improving ease of doing business, etc. & in our view this budget falls in the same line & provides comfort that the same would continue even outside the budget as & when required.

What are the most attractive sectors especially after the Budget?

Large government capex outlay push (up 33 percent YoY), on a high base, would be very positive for capex plays. Road capex (up 25 percent) and railways (up 15 percent) have received major push & players in these segments would benefit.

Overall allocation for low-cost housing and capex (including roads) remains strong at absolute levels & will be positive demand for the cement industry.

Government plans to allocate funds to replace old government vehicles & this could be positive for passenger vehicle demand.

Promotion of tourism will be taken on mission mode with active participation of states and PPP mode. 50 new airports, helipads, aerodromes, etc. will be built to improve connectivity across the country. This should help the hotel & tourism industry.

Consumption would continue to remain a structural story in India given low penetration in most categories, in the near-term tax benefits provided to the middle-class would support consumers who has got impacted by inflation.

Are you bullish on the travel and tourism sector?

Government has clearly shown its focus to develop the travel and tourism industry and continues to build on the good work it has been doing for the last few years by connecting various parts of the country through airports, new rail lines and broad roads. Government has also been calling upon private players to set up hotels in new locations and giving tax incentives for the same.

I am very bullish on the whole domestic tourism sector considering post pandemic the local population have taken to domestic travel in an unprecedented scale and this would continue to grow. Also in the budget the tax collection at source for overseas packages by tour operators has gone up. This would also aid more of domestic travel.

Do you think the divestment target of Rs 61,000 crore for FY24 is achievable?

In my view the overall budget assumptions are pretty manageable given the buoyancy in revenue collection in both corporate and income tax as well as strong GST collection. On the specific question of divestment target of Rs 61,000 crore, the same is possible if government is able to manage sale of both IDBI Bank & Container Corporation as these two can garner close to Rs 45,000 crore at current prices.

Do you really believe there would be huge jobs creation in the years to come?

Job creation is an outcome of capital expenditure and infrastructure spends across various sectors. I feel there is strong scope of major job creation opportunities if the planned projects and outlays are put to work in the right manner.

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