“The biggest positive in the interim budget was the fiscal discipline displayed by capping the fiscal deficit for 2024-25 at 5.1%,” says Devang Mehta, Director – Equity Advisory, Spark Capital Private Wealth Management.
In an interview with ETMarkets, Mehta who has over 23 years of experience in capital markets across various domains said: “Strong signalling of continuity in the fiscal thinking and strategy of the Government, particularly in the event of a political continuity after the general elections was the underlying message here,” Edited excerpts:
How do you rate the Interim Budget on a scale of 1-10 (10 being the best) and why?
Devang Mehta: I would rate it somewhere between 8 to 9, a budget without any chills, thrills, and frills. It was business as usual with an intent for policy continuity and underscored the government’s commitment to fiscal prudence and consolidation.
The FM refrained from the temptation of introducing any big, populist measures aimed at strengthening their position before the upcoming elections, which was a big positive.
The part of the budget for railways was interesting, the upgradation of nearly 40,000 bogies to Vande Bharat standards and more importantly dedicated freight corridors and improved port connectivity.
The creation of a Rs 1 lakh crore corpus with a 50-year interest-free loan for tech-savvy growth also was a step in the right direction.
For FY25 the fiscal deficit target is 5.1% which is a positive surprise, and it re-emphasizes the fact that we are following the glide path of fiscal prudence.
Gross market borrowing for FY25e is estimated at Rs 14.1L crores while net borrowing is expected to be Rs 11.8L crores.
Both the numbers are below the street estimates and as a result, the 10-Year bond yield was down by 8 bps after the budget announcement.
This is going to be a big positive by way of containing inflation expectations as well as bringing down borrowing costs for the private sector.
This is being done in a year when there will be international money flowing into Indian bond markets from June onwards owing to inclusion in the JPM Emerging Markets bond index.
The lower borrowing costs will coincide with the likely resumption of consumption revival in the second half of FY25, and this will aid the private capex sentiment.
Rs 11.11 lakh cr – a number which has caught the eye of many. What do you make of the current outlay and the impact it will have on the economy?
Devang Mehta: The Government increased the budget outlay last year by 33% to Rs 10 lakh crores. Considering the already high base of FY23- 24, the increase in next year Capex’s which is 3.4 percent of the GDP is truly admirable and markets will take it very positively.
Rs 11.11 lakh cr is a good number on the capex front to continue the impact created in the last three years.
The effect of this spending is multifold on the economic front in terms of Infra creation, manufacturing boost, job creation, upgrading people’s living standards, and indirectly boosting consumption.
The government had accelerated capital expenditure to stimulate economic recovery post-COVID. Now, with the economy finding its rhythm, even the private sector will jump on the bandwagon and there are already green shoots that prove this.
A lower-than-expected fiscal deficit target of 5.1% of GDP for FY25 and even lower 4.5% by 2025-26 – how do you read this?
Devang Mehta: The biggest positive in the interim budget was the fiscal discipline displayed by capping the fiscal deficit for 2024-25 at 5.1%.
The fact that the government has not curtailed capital expenditure and has, in fact, enhanced it to Rs 11.11 lakh crore only builds on the foundation laid in the previous years and takes it forward. This is a budget that seeks to balance growth with fiscal prudence.
Honestly, this was one announcement that stood out and made this budget an economy-friendly one.
Strong signalling of continuity in the fiscal thinking and strategy of the Government, particularly in the event of a political continuity after the general elections was the underlying message here.
This will boost investor sentiment, both domestic and foreign, on India’s macro-financial stability.
Which sectors are likely to benefit the most from Budget 2024?
Devang Mehta: While this judicious, non-populist budget may not have made any big direct transfer announcements to boost consumerism in the immediate term, the higher outlay on infrastructure development and sops for rural housing, farming and fisheries would certainly have a multiplier impact and help improve sentiments in the long term.
Capital expenditure as a theme with underlying sectors like Capital goods, Infrastructure, power ancillaries, motion management, energy efficiency, and renewable space would continue to do well.
Also with the prudence observed on fiscal deficit and the government borrowing front, financials will start attracting flows both local and foreign.
Automobile, auto parts, and select discretionary consumption-related sectors should also continue to do well as a proxy where capex and credit growth will thrive. Focus on rural India and social healthcare schemes will benefit the healthcare sector.
The government’s focus on promoting domestic tourism, particularly religious tourism, is a step forward in the right direction.
This will induce a multiplier effect on these cities, not just in terms of hotels, real estate and infrastructure development but also generate employment.
Although the Budget highlighted continuity of policies and more outlay – are there red flags that you saw in the Budget?
Devang Mehta: Rather than red flags, the budget has factored in estimates that are actually conservative or at best realistic. The numbers are achievable and authentic, which lends a lot of credibility amongst the investing community both in India and globally.
What is your take on the rising interest of the govt on renewable or green energy? Will this space produce maximum multibaggers in the near future?
Devang Mehta: The focus on green energy will help accelerate the adoption of clean energies across sectors, making a substantial contribution to reducing the country’s carbon footprint.
There are a number of proxy plays in this sector that are going to be huge beneficiaries and have the power of being big compounders if one has the patience and discipline to hold these businesses for the longer term.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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