"A twin-pronged approach of supportive fiscal to supplement a potentially dovish monetary policy going forward could pave the path for economic recovery," said Navneet Munot, MD & CEO at HDFC Asset Management Company in an interview to Moneycontrol.
According to him, more money in the hands of the Middle-Class through tax reliefs in the Budget not only bolsters consumption but could also spur household savings.
Further, manageable fiscal borrowing should help to crowd in private capex over the medium term – something which investors (domestic and foreign) could view positively, said the financial markets veteran with three decades of experience in the industry.
According to him, with the Budget event behind, markets will now focus on global cues, upcoming RBI meeting and earnings outlook.
Is this truly a game-changing budget? How would you rate the budget out of 10?
Considering the challenging global environment and a moderation in domestic growth, it would be fair to say that the Union Budget did a fine job of fostering growth without losing sight of fiscal responsibility. Government has been doing heavy lifting on capex over the past few years. Spurring consumption by putting money in the hands of the tax payers is a step in the right direction now, especially against the backdrop of sluggish consumption in recent times. While rating broadly on a scale of 10 may not do justice to it, one can say that the Budget has certainly built on reforms initiated over the past few years and to that effect it was a commendable one.
Do you believe that this budget, along with the expected easing of liquidity in the monetary policy by the RBI next week, will pave the way for economic recovery?
While public capex has been the talk of the town over the past few years, the push for consumption by way of tax-cuts does provide an added and much-needed fillip to our economy’s growth aspirations. While continued focus on capex will provide the multiplier-effect and aid job-creation, tax rationalisation will support consumption – which has been lacklustre over the past few years.
Interestingly, the tax rationalisation will not only bolster consumption but could also spur household savings – which has waned since the post-pandemic surge. Measures to improve Ease of doing business, encouraging Public-Private participation in Infrastructure etc could help Investments. So, on the balance, a twin-pronged approach of supportive fiscal to supplement a potentially dovish monetary policy going forward could pave the path for economic recovery.
How do you interpret this budget in relation to the equity markets, which have been in a bearish phase and consolidation zone since September 2024?
Firstly, the weakness in equities since September 2024 has to be viewed in light of the sharp run-up over the past couple of years. Expensive valuations, slowing domestic growth, sluggish consumption, weak global cues, a stronger dollar, FPI outflows have all played a part in the recent correction. While the budget may not have sparked an immediate rally in equity market, the structural and cyclical push provided by the Budget has not gone unnoticed.
More money in the hands of the Middle-Class not only bolsters consumption but could also spur household savings. Post-pandemic surge in Households savings has waned over the past few years, along with a marked surge in household debt. Reduction of tax burden could help in addressing this challenge and give the middle-class more breathing space to save and invest. This could aid the already strong DII Flows by way of MF SIPs. Further, manageable fiscal borrowing should help to crowd in private capex over the medium term – something which investors (domestic and foreign) could view positively. With the event behind us, markets will now focus on global cues, upcoming RBI meeting and earnings outlook.
Do you think the focus on simplifying the tax structure will definitely ensure greater ease of doing business going forward?
Simplification of tax structure and ease of compliance has been a focus area for the Government over the past few years. It is often said that the magic lies in doing the simple things repeatedly enough. This Budget does that by building up on the reforms initiated over the past few years. Measures like reducing the number of customs tariff rates and decrease in average customs duty rate sends a positive message to the world, especially in an environment rife with tariff and counter-tariff rhetoric. New Direct Tax Bill, which will be introduced this week could further simplify the direct tax system. Continued focus on ease of doing business will certainly instil confidence in investors – domestic and foreign alike.
Do you foresee a significant shift in investment planning after this budget?
Goes without saying that Central Government had been doing the heavy lifting on Public capex over the past few years. The Budget has seen the Government rightfully shifting some onus of capex to States and Private sector through some of the measures announced. Substantial budgetary allocation for Interest-Free loans to States could help catalyse Capex at State level too and could strengthen infrastructure across the country. Encouraging Public-Private Partnership through measures like Urban Challenge Fund could encourage greater Private sector participation in capex. Manageable fiscal borrowing too should help to crowd in private capex over the medium term.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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