Daily Voice: This CIO rates budget an '8 out of 10', believes FY26 fiscal deficit target appears achievable

Shailendra Kumar is the Chief Investment Officer at Narnolia Financial Services

Shailendra Kumar, chief investment officer at Narnolia Financial Services rated the Union Budget an 8 out of 10. A perfect 10 is withheld pending initiatives like tax simplification, friendly implementation, and the effective implementation of the Rs 1 lakh crore allocated for urban redevelopment, he said in an interview to Moneycontrol.

Post-budget, according to him, portfolio adjustments are anticipated, leading to a more balanced distribution across investment-related sectors, consumer goods, financials, and export-oriented industries.

He believes with no anticipated shortfalls in income or overspending, the FY26 fiscal deficit target appears achievable. Shailendra Kumar has more than two decades of experience in the fund management & investment advisory.

Has the Union Budget 2025 exceeded your expectations? How would you rate it out of 10?

Budget 2025 has generally surpassed expectations by incorporating demand-side initiatives, such as foregoing Rs 1 lakh crore in taxes while maintaining crucial supply-side measures like the emphasis on capex. We rate it an 8 out of 10. A perfect 10 is withheld pending initiatives like tax simplification, friendly implementation, and the effective implementation of the Rs 1 lakh crore allocated for urban redevelopment.

Where do you see the disappointments if you read the budget fine print? Also, what did you like most about the budget?

India Inc. has recently faced challenges related to a high compliance burden and an ad-hoc approach, particularly in indirect taxation. While the Finance Minister has pledged to address these issues, swift and effective implementation is crucial.

Over the past five years, the government has prioritized supply-side initiatives, focusing on capacity building in infrastructure, railways, defense, and targeted manufacturing sectors like electronics and solar. Budget 2025, while continuing this capex momentum, also seeks to stimulate domestic demand, which is a positive development.

Has the budget truly reinforced India’s commitment to economic resilience?

Adhering to the FRBM fiscal deficit glide path and managing government net borrowings are strong indicators of Indian economic resilience. The government's flexible approach to sectoral dynamics is also a positive sign. India's policy landscape has evolved over the past 8-9 years, initially emphasizing formalization, then shifting to a strong focus on supply-side reforms, and now moving towards a more balanced approach, which is beneficial for the long-term health of the Indian economy.

Do you foresee significant changes in portfolios post-budget?

Post-budget, portfolio adjustments are anticipated, leading to a more balanced distribution across investment-related sectors, consumer goods, financials, and export-oriented industries.

Do you think the fiscal deficit target set for FY26 is achievable?

Despite a high fiscal deficit of 9% in 2021, the government had committed to the FRBM Act and aimed to reduce the deficit to below 4.5% by FY26. The Finance Minister has maintained this fiscal prudence, setting a target of 4.4% for FY26. The government projects a 10% increase in income to Rs 34.96 lakh crore and an 8% rise in expenditure to Rs 50.65 lakh crore compared to FY25. With no anticipated shortfalls in income or overspending, the FY26 fiscal deficit target appears achievable.

Do you strongly foresee an interest rate cut by the RBI next week?

The government's gross borrowing of Rs 14.82 lakh crore for FY26 represents a modest increase. With a lower fiscal deficit and various other government initiatives, a rate-cut cycle by the RBI is anticipated. The new RBI Governor has already initiated increased OMOs (open market operations), and further actions are expected to enhance liquidity. The MPC (Monetary Policy Committee) also has a fresh composition, with a new Governor and three new external members who joined in October. However, the planned Rs 2.5 lakh crore shifts from near-maturity to long-maturity bonds could put upward pressure on 10-year bond yields in the short term.

Do you think the government has done enough in the budget to boost the agriculture sector?

While the government's allocation to the Ministry of Agriculture and Farmers’ Welfare saw a marginal 4% increase to Rs 1.37 lakh crore, the focus of this allocation is promising. Targeting 100 districts with low productivity, moderate crop intensity, and below-average credit parameters is a positive step. The allocation of funds for specific initiatives like the mission for pulses, vegetables and fruits, makhana Board, hybrid seeds, and cotton, is crucial for boosting agricultural productivity, promoting crop diversification, and encouraging sustainable agricultural practices.