Moneycontrol Pro Panorama | It’s all about the fisc

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

The common thread behind many news headlines in recent days is the stretched finances of the government.

Yesterday, the finance minister announced yet another credit outreach programme by banks.

Earlier in the day, Maruti Suzuki chief RC Bhargava and TVS chairman Venu Srinivasan criticised the government for continuing with high taxes on automobiles.

High taxes are what plague fuel prices too at the pump, notwithstanding explanations involving the repayment of oil bonds issued many years ago.

Then, of course, there is the national asset monetisation pipeline. It is a quick way of bringing forward future cash flows from infrastructure assets. It could open up options for retail investors, we had written two days ago. Today, we have another piece analysing its implications and challenges.

In all these cases, it is the government’s financial position which partly, if not wholly, dictated policy.

No government will want to miss an opportunity in putting cash in the hands of the poor, at a time when many have lost employment and seen incomes falling. But stretched finances means that the government’s stimulus programmes have mostly leant on banks disbursing loans.

Similarly, cutting taxes would be an easy way to stimulate demand and ease the burden of higher fuel prices. But these fuel taxes were Rs 3.45 lakh crore in 2020-21 – in other words, almost one in every five rupees earned by way of gross tax revenues for the Centre was from petrol and diesel.

The fiscal deficit is projected at 6.8 percent of GDP in the current financial year. India’s debt to GDP ratio is already at 90 percent. Cutting taxes is a difficult option since a worsening of these yardsticks could hit credit rating and affect foreign capital flows. No amount of lobbying is likely to change that even if it is from the Reserve Bank of India itself.

Our research team has also written the following notes full of investment insights:

Kirloskar Ferrous: Second round of capex likely to support earnings growth

Thangamayil Jewellery: Set to shine again

What else are we reading today?

Are recent IPO listings signalling market fatigue?

Chart of the Day | Sharp decline in China’s steel output hints at more to come

IT companies' outlook brightens on rising demand for cloud services

Will gold have its day as a crisis hedge? (Republished from the FT)

Picks from our Technical Analysts: Tech Mahindra, IRCTC, Escorts and Happiest Minds (These are published every trading day before markets open and can be read on the app)

Ravi Krishnan

Moneycontrol Pro