A boost in rural productivity could create a multiplier effect in consumption as rural growth has de-grown urban growth in the past fiscal.
Budget shall lay huge focus on farmers credit, incentives through DBT for assisting farmers get their share for inputs required for farming, improved mechanisation/better irrigation facilities, better yield for their products and access to the direct market mechanism, Mayuresh Joshi, Head of Equity - India, William O’Neil India, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:Q) What are your expectations from the upcoming Budget? Do you think it will turn out to a Budget that will count considering the fact that growth estimates are heading South?
A) The government shall need to generate incentives surrounding growth as most of our macro indicators have looked fragile. In addition, the stoking of inflation, soft tax collections both Direct and Indirect, weak private CAPEX (which is expected to pick up with the tax rates for new units announced earlier by the Exchequer) and increasing the gross domestic savings as a % to GDP are some of the challenges encountered at this point of time.
So, in my opinion, it shall be a growth-oriented Budget with focus laid out on three broad aspects:
a) Doubling of farmers' income by FY22: It shall lay a huge focus on farmers' credit, incentives through DBT for assisting farmers to get their share for inputs required for farming, improved mechanisation/better irrigation facilities, the better yield for their products and access to the direct market mechanism.
Such announcements were done, if any, shall boost rural productivity and create a multiplier effect in consumption as rural growth has de-grown urban growth in the past fiscal.
A better RABI output shall also act as a trigger point along with such measures to boost demand and correspondingly growth and also in better corporate earnings a few quarters down the line.
b) Affordable housing and Infrastructure: Though lot has been said/spoken in the past, there, in my opinion, shall be firm/time-bound steps in these aspects with most of the planned capital expenditure directed towards this aspect.
Getting projects that need to be implemented on the Government side with timely financial closures and proper execution shall be in my opinion put under the scanner as well as getting private participation where a majority due diligence shall be done and projects need to be completed and delivered shall take precedence.
Also, the affordable housing efforts to gain speed with further incentives and support that may get announced can create a spiral effect for a lot of inputs associated with the sector viz. cement, steel, home improvement players etc.
c) Availability of Credit: Measures that may get announced in providing credit to the sectors that need liquidity and also the manner and mechanism in which the same can be achieved.
Resolution of NCLT cases provides relief to the sector but NBFCs getting liquidity support and the aforesaid two factors contributing can get the boost that the economy needs with both the consumption and supply factors working at play in tandem.
Q) Do you think Govt. will be able to meet this fiscal deficit target? If not, what is the extent of slippage you are looking at which market would be comfortable with?
A) With the tax collection figures (both Direct and Indirect) looking soft, divestments so far not expected to meet the mark, larger borrowings from the market and the provisioning related to the subsidies shall cause stress in meeting the Fiscal Deficit numbers.
My belief is that a 20-30bps slippage can be accepted by the market as it has been an extraordinary year for most economies and the GDP forecast downgrades for a majority of the economies conducted by the IMF which is an outcome of fiscal imbalances in most countries shall bear testimony that a small slippage should be accepted by the markets.
The bond market movement in terms of the same shall also need to be monitored but the yield curve so far is indicating that it is gestating the same in terms of a slight miss on the number.
Q) Which are the sectors that are likely to hog the limelight in this Budget 2020 and why?
A) Banking and Financial Services, Agri and Agri inputs, and Infrastructure.
Q) What are the expectations from Budget 2020 from investors or market perspective?
A) Large expectations are cut in personal income tax rates, leeway in capital gains, reduction in STT and CTT.
Q) Do you think infrastructure could turn out to be a strong beneficiary in the upcoming Budget?
A) I believe it would as sound infrastructure spending creates benefits that can be reaped by a lot of other consuming sectors.
Q) The govt struggled to meet the divestment target in FY20. What are the estimates you are factoring in for the next fiscal?
A) My belief is that the next fiscal shall provide plenty of opportunities for the government to meet its divestment target. It also gives them enough time to do complete due diligence and get roper bids in terms of efforts that they initiated to privatize Air India and BPCL. My belief that a target of 1.25 lakh crores is plausible next fiscal.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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