00:00 After hitting a 6-year low of 4.5% in the September quarter, India's economic growth
00:17 is expected to remain tepid even in 2020.
00:21 Liquidity crunch, consumption slowdown and weak job creation have weighed heavily on
00:27 India's economy.
00:28 Adding to the woes, the fiscal deficit is already stretched and now inflation is climbing
00:33 up.
00:34 Today, we are asking the question, will the budget be able to boost market sentiment?
00:40 To discuss this, we have with us Sunil Singhania from Abacus Asset Manager and Nilesh Shetty
00:47 from Quantum Mutual Fund.
00:50 So starting with you Sunil, do you think the government has the leeway to boost economic
00:55 growth which can in turn sustain market rally?
00:58 So there are two aspects to it.
01:01 One is the financial boosting and the other is policy announcement boosting.
01:09 So if you look at the announcements part, which is the second part, I think there are
01:13 a lot of leeways.
01:14 One is obviously tinkering with some taxation which leads to higher income in the hands
01:22 of retail or individual population or taxpayers.
01:28 And also possibility of some tinkering with the capital gains side also.
01:32 So there are some avenues there.
01:36 On the policy matters which might have financial impact, obviously the whole boost which the
01:43 economy needed is because of lack of spending.
01:47 So if the government increases its planned expenditure, obviously it will give a big
01:53 boost to the economy.
01:55 Planned expenditure will be predominantly on the infrastructure side.
01:59 I think this might lead to slightly higher fiscal deficit.
02:03 But I think it's not going to be the end of the world if fiscal deficit temporarily
02:07 inches up by 30-40 basis points.
02:09 Nilesh, what about you?
02:12 I mean, given that there are significant fiscal constraints right now, and by and large the
02:19 fiscal deficit number is much higher than whatever the government gives in the budget,
02:26 primarily because they resorted to borrowing through public sector enterprises, which traditionally
02:32 were part of the budget, to essentially subdue this reported fiscal deficit number, which
02:38 most people do not believe anymore.
02:40 And the aggressive tax assumptions that they had, which by and large even then looked very
02:44 optimistic and now after the actual numbers coming through, look extremely optimistic.
02:48 There seems very little fiscal leeway that the government has to boost economic sentiments.
02:55 Will the markets get spooked if the government misses the fiscal deficit target?
03:02 I think more or less the market is already discounting that there is going to be some
03:05 sleepage.
03:06 But if an additional sleepage is to boost the economy temporarily, I don't think the
03:13 market will have an impact.
03:15 Because ultimately, if the economy starts to do well, it will more than recover the
03:20 fiscal sleepage by way of additional taxes.
03:23 I don't think they will get spooked.
03:24 I think it is expected.
03:25 It is not something which is unknown, given that all the data is in the public domain.
03:29 I don't think people will get spooked about the government missing.
03:33 I think it's already a given.
03:34 It's a known variable.
03:35 It remains an unknown variable that people believe the government is going to miss.
03:40 Or the expectations are that they are going to meet and the government actually misses.
03:44 By and large, most people already know that the government is going to miss the FY20 fiscal
03:49 deficit target.
03:50 What they are looking for is, what is the plan next year?
03:53 Do they get, given the desperation for growth, do they get even more fiscally more reckless
03:59 in the sense that do they do something which can put further strain on the finances of
04:04 the government?
04:05 Your final take, will the budget be able to boost the market sentiment?
04:09 So, one thing is, ever since September, the government has been constantly announcing
04:15 economy and market-friendly policies.
04:16 You know, whether it was reduction in corporate tax rate, lower tax rate for new manufacturing
04:22 entities, AI announcements, AI in real estate and so on and so forth.
04:27 The Prime Minister himself has been meeting prominent industrialist, economists and market
04:31 participants over the last one week or so.
04:33 So, I think from September onwards, we have already started to see that.
04:38 It's having an impact gradually.
04:40 But in the run-up to the budget, we might see many more announcements, I think.
04:45 So, I think budget would be the culmination of all the policy measures which the government
04:49 want to do to boost the economy and obviously the sentiment.
04:52 I think over the years, the budget itself has lost its importance.
04:57 I think the economy has grown much bigger and government finances as a part of the GDP
05:02 is sort of not, it doesn't move the needle that much.
05:06 You get a sense of where the government intends to spend and then long-term policy plans and
05:11 other social schemes.
05:13 But even now, even the direct taxes are set by the GST concept which is outside the budget,
05:18 it really doesn't warrant that kind of importance as the media gives it.
05:23 So, we don't believe it has a material impact on the investor sentiment.
05:30 Apart from if government does something on taxation for say investors in general,
05:35 it will have a bit of impact on the share market.
05:39 But by and large, most serious investors, apart from a cursory glance, don't give it
05:43 too much importance right now.
05:45 Thank you.
05:49 Thank you.
05:52 Thank you.
05:53 [MUSIC PLAYING]
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