In an exclusive post-Budget 2025 interview with Moneycontrol, Jigar Mistry, co-founder at Buoyant Capital, offered a candid take on the government’s fiscal strategy and its potential implications for the markets. While the market reacted positively to the lower-than-expected fiscal deficit, Mistry was quick to challenge the prevailing narrative about the Budget.
“Banks don’t look as good in the short term,” he said. The banking sector, which typically benefits from infrastructure spending and a strong corporate tax base, may not experience significant gains in the near term, given the government’s shift toward consumption-focused measures. Furthermore, the possibility of higher yields due to fiscal uncertainties could put additional pressure on banks in the short run.
The overall sentiment of Union Budget 2025, he believes, was to relieve wider mass, than a select few pockets - in contrast to providing a rebound set-up to specific sectors and sub-segments suffering setback. "There is a definitive push away from the last few budgets... and this time the focus is on a wider base that benefits in small proportions rather than select few," he said.
He differed on being asked about the budget announcement turning to be a surprise over the fiscal deficit being lower than anticipated. “There is a pivotal shift of the government away from capital expenditure (capex) into consumption,” Mistry explained. It signifies a departure from the traditional focus on long-term infrastructure projects, which typically provide a multiplier effect on the economy, and towards stimulating immediate domestic consumption.
For years, capex—investment in roads, bridges, and other infrastructure—has been a cornerstone of India's growth strategy. But now, Mistry believes the government is shifting focus to stimulating consumer demand through targeted relief, tax cuts, and direct benefits. “I think the government is simply looking a little closer to home,” he added, referring to the standard expectation that infrastructure spending would drive broader economic growth.
Mistry further pointed to the government’s reliance on personal income tax as a key revenue driver. “60% of it [the government’s] 8-month collection was because of personal tax,” he noted, in contrast to corporate tax growth has been minimal. “Corporate was at 0,” he said, indicating that businesses have not been contributing as robustly to the fiscal system - possibly due to weaker earnings or relief measures aimed at businesses. Large portion of this growth came from capital gains and self-declared provisional taxes (SDP), rather than a broad-based increase in wages or consumption, he pointed out. But the attention away from these factors right now could lead to volatility, especially in government bond markets, where yields may spike as investors reassess the government’s fiscal health.
For Mistry, this suggests that while the figures may look positive on paper, they might not be sustainable in the long run, particularly if the growth is driven by one-off factors rather than sustained, broad-based economic growth.
Another key point Mistry raised was the substantial dividend payout from the Reserve Bank of India (RBI) to the government—amounting to a massive Rs 3.25 lakh crore. While this provides an immediate fiscal cushion, Mistry expressed skepticism about its sustainability. “At a time when you could be called to do larger Open Market Operations (OMO), I don’t think the market wants to believe such high numbers,” he said. OMOs, which involve buying or selling government securities to manage liquidity, could become necessary if market conditions become volatile, especially as higher fiscal deficits might lead to increased borrowing costs. This, in turn, could create a mismatch in fiscal policy and market expectations.
While the shift towards consumption-driven growth may provide some short-term relief, the broader structural challenges—including flat corporate tax growth and concerns over government liquidity operations—could dampen market sentiment.
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