Sunil Singhania, Founder, Abakkus Asset Manager, says “whether it is housing for all, the new solar rooftop generation for one crore households, focus on infrastructure, the planned expenditure increased from Rs 10 lakh crore to Rs 11.1 lakh crore, it is all in the direction of what was happening over the last two-three-four years. So, it is business as usual and that should be taken very positively because that is what long-term planning in a vibrant democracy, in a fast-growing democracy is all about.”
What is the first take from the Interim Budget?
Sunil Singhania: Frankly, nothing was expected from the Interim Budget. It is a vote on account. Over the last four-five years, the relevance of the Budget in terms of major decisions has been reducing and as far as we were concerned, we were expecting the same to be carried forward as it was vote on account. And even if it was a full budget, we just expected what was being done over the last three-four years to be carried forward.
So, what was being done? Obviously fiscal prudence. There is a little bit of surprise with the fiscal deficit target of next year coming at 5.1%. The bond markets are already reacting to it. To some extent, that would be positive. Also, all the statements which were made over the last two-three years by the government and by the prime minister have all been reinforced.
So, whether it is housing for all, the new solar rooftop generation for one crore households, focus on infrastructure, the planned expenditure increased from Rs 10 lakh crore to Rs 11.1 lakh crore, it is all in the direction of what was happening over the last two-three-four years. So, it is business as usual and that should be taken very positively because that is what long-term planning in a vibrant democracy, in a fast-growing democracy is all about.
I want to go back to that whole point of the fiscal deficit maths versus the capex outlay. The whole hallmark of the government essentially has been post COVID that you have really kick-started the economic growth momentum with the help of government (10:52) roads, bridges, railways. Will markets be happy with this capital expenditure number of Rs 11.1 lakh crore and the fiscal deficit of 5.1% for next year?
Sunil Singhania: Tax collection has tended up much better than what the government had expected and I think it is a very pleasant surprise because in the past we have seen finance ministers sort of being optimistic over the tax collections and then falling back. Now, we have a situation where the expectations are reasonable and tax collections have come up higher and I think that is the reason why the fiscal deficit, even in this tough year, has come in at 5.8% vis-à-vis 5.9&. This is an interim budget. So, obviously all the numbers are an approximation. But two-three things have happened. One is obviously the outlook on the Indian economy is great and therefore tax collection should be decent. On the other hand, you also have subsidies which have just about vanished, except the food subsidy, which is essential for a poor country like India. So, there is hardly any fuel subsidy.
The fertiliser subsidies have come down because fertiliser prices globally have been pretty weak. On the other hand, because of what has happened on the investments of the government, on the PSU investments, I think the balance sheet of the country is phenomenal. So, if there is any gap, there is more than enough room for the government to be a little bit more aggressive on its disinvestment plan and ensure that this fiscal prudence is met. There are other reasons also.
There are companies like Air India, which used to eat into the government finances by making losses of Rs 30,000, 40,000 crore. They are out of the balance sheet of the government. Railways has started to launch products which are well accepted by the population but also are profitable, like Vande Bharat. The higher fares are being accepted and that makes the railways self-funded. So, all in all, this whole guideline which the government had given of fiscal deficit touching 4.5% by FY26 seems to be on track.
This capital expenditure, whether it is Rs 11.1 or 11.5 lakh crore, we will have to see because as we all know it is an interim budget, so we should not be too disappointed that it should have been 15% growth rather than 11% growth. I think this 11% growth or 10% growth is significant given the fact that last year we had a 33% jump in the outlay.
We have not only maintained that, we have grown at 10-11% over that. So, all in all, the direction is very clear. The clarity with the government is very clear. We have not done too much of changes, which again is well accepted because no one has to do anything, it is business as usual, it is life as usual and obviously we will have a full-fledged budget post the election, maybe in June, July which will lay the roadmap for the next five years in a more detailed manner.
So, at least personally, I and as a firm, we are very pleased with what has happened and I think this was expected and that is why you are not seeing any movement in the markets per se, though the bonds have surged, the yields have fallen by 10 basis points which is again good for the financial markets.
Everybody is using the word digilocker. I am going to write India. What do you think will come from Sunil Singhania’s digilocker?
Sunil Singhania: I think “be positive” will come out. I think in the last 20-25 years, whoever has been positive about India has had good health, wealth and a lot of smiles and we have entered a phase where there is consistency in terms of governance. Ultimately, returns are made by being consistent, being simple. I think we try to overthink matters too much, but it is the same thing, nothing has changed.
We continue to be optimistic on largecap financials which have not performed. I think they are set. We will continue to believe that massive investment is going to happen in a variety of sectors like railway. Now, we have a solar rooftop, which will continue. A lot of these companies which are normally not favoured might come into favour. The way PSUs came into favour in the last two-three years, Engineering, infra companies will be in favour and at some point of time, discretionary consumption has lagged and as India moves ahead in terms of GDP, disposable income will rise. I would say the want-based consumption names look pretty good from a 5-10 years perspective.
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