The government should come out with more policies to revive the real estate sector, given that it is one of the biggest employment generators in the economy, Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd, says in an interview to Moneycontrol’s Kshitij Anand.
Q) What are your expectations from the Budget? With growth estimates heading south, do you think it will be a Budget that will count?
A) Given a very low growth rate, this Budget will be very critical and the government will need to make it count. We believe that the government should focus on fiscal expansion rather than consolidation given the very low growth rates.
The sharp jump in headline inflation to 7.35 percent in December is largely on account of food prices, which should normalise in some time.
We believe the government will continue its focus on infrastructure, housing, manufacturing and rural economy, as a lot still needs to be do done on all these fronts.
We believe that there is a high probability that the government could also relax the fiscal deficit target for FY21.Q) Do you think the government will meet the fiscal deficit target? How much of the slippage will the market be comfortable with?
A) Given very low growth rates, we feel that some amount of fiscal slippage is necessary and would be beneficial for the economy.
We feel that markets would not be too worried about a 20-30bps slippage in the fiscal deficit target for FY21. Moreover, if required the RBI can step in to absorb the excess supply of government bonds through unconventional monetary measures like OMO or operation twist.
Given that there is excess liquidity in the system of over Rs 2.5 lakh crore. The RBI may prefer to buy longer dated securities from the market, while at the same time, sell shorter dated securities to bring down long-term rates rather than conducting OMOs.Q) Which are the sectors likely to hog the limelight in the Budget and why?
A) We believe that sectors like infrastructure and allied sectors such as real estate, consumer discretionary and manufacturing will hog the limelight in this Union Budget.
The government has clearly highlighted its focus on the infra sector by announcing plans to invest Rs 100 lakh cr. over the next five years.
We expect the government to come out with more policies to revive the real-estate sector, given that it is one of the biggest employment generators in the economy.
There is also an expectation that the government could tinker with the personal-tax rates in the Budget either by way of reducing tax rates or by raising exemption limits, which will put more disposable income in the hands of the taxpayers and will be beneficial for the consumer discretionary sector.
The government could also increase import duties on specific items to encourage domestic manufacturing, which will be beneficial for the manufacturing sector.
Q) Do you think infrastructure could turn out to be a strong beneficiary?
A) As highlighted above, we believe that infrastructure and allied sectors will be strong beneficiaries in the upcoming Union Budget
Q) The government has struggled to meet the divestment target in FY20. What are the estimates you are factoring in for the next fiscal?
A) We feel that the government would do significantly better in the next financial year in terms of disinvestments, as few of the large-scale divestments like BPCL have got pushed into the next financial year.
While there would be a significant miss to FY20’s disinvestment target of Rs 1.05 lakh crore, we feel that the FY21 disinvestment target would be similar to last year’s target.
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