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However much we may say that budget barely matters for the market, it is a platform where the commentary coming from the Finance Minister would have reflection on the market and important data points relating to the economy etc. will be shared. What are one or two numbers the market would watch out for?
Sahil Kapoor: It is a vote on account, so I do not think there will be any drastic changes done, but two numbers I will highlight which are important, first is the overall expenditure, I think that is going to be an important message, how far and strongly is going to, government is going to go on the path of fiscal consolidation is something that the state would want to know, although the annual fiscal deficit number is anybody’s guess right, but the glide path is very important.
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What I am interested in the expenditure number is about what kind of capex the government promises. In the last two to three years they have been growing capex at about 25 to 30%, a very large number. Before Covid, the government used to spend Rs 2.5-3 lakh crore on capex. That has grown to about Rs 10 lakh crore last year. Can this number go to Rs 11.5 lakh crore, which is about a 15% jump, much smaller than last two years?
I think that is what the state is expecting, so there will be a slowdown in terms of last two-three years capex expenditure, that is the incremental increase but the overall number is going to be closer to that number. If the number is below this number, questions will be asked about the sustainability of what we have seen for the last two-three years. So, this is the first number that I will be looking forward to, expenditure and within that what is the capex that the government is going to announce.
The second is going to be the gross market borrowing, so expectation is that this year that number will be held steady, there will not be a large change, we will be closer to Rs 50.5 lakh crore and so not a big jump in terms of overall borrowing that the government will do. It will more or less give more credence to the GSEC market, give RBI more cushion room, more elbow room to cut rates during the year as inflation numbers have already gone down.
That demand and supply of bonds will be crucial numbers. I think these two are important numbers, other than of course the tax related changes. Those will also be crucial, but because it is a vote on account, expectations are low of any major announcement.There is some amount of premium built in for the superior growth which we are witnessing in our economy and policy environment has a role to play in that, but everybody is questioning or wondering that in the new regime or the next couple of years what are the areas of reform which are left to be taken up?
Sahil Kapoor: I think there are two three important areas, one, when I look at the policy environment, it is largely a reflection of what is happening in other emerging markets today. So I think from that sense India comes out as a much clearer winner when you compare it to let us say other emerging markets where policy environment has been a lot more challenging, so that continuity should continue that means people, investors would expect that there are no new surprises and that I think is one of the best outcomes. Second, of course, the government has to focus on employment situation that I think it has been a big focus over the last five to seven years, largely that has to translate into numbers going ahead so there has been a focus over the last three to four years specifically on manufacturing that I think in some areas has started to build up in terms of numbers. If those numbers can be scaled up and employment can be created in those areas particularly for example electronic goods manufacturing and brown goods manufacturing, if those numbers can be scaled up I think it will be a very important piece to watch out for.
As you said, I will not go into capex and infra spending that will require continuity and which the government has already done.
The third and most important area is law and order in terms of the industrial complex, that has been a big challenge for India for a very long period of time, setting up shop in India for international businesses, domestic businesses and having a conducive environment to run those businesses I think that is changing over the last many years, more work is required and I think that will be an area where probably government will focus on.
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