10,142.15113.05
Stock Analysis, IPO, Mutual Funds, Bonds & More

View: Selloff blueprint, focused capex spend are crucial

The fillip provided to the MSME sector is, in particular, well and deeply thought out. For instance, audit limits up to Rs 5 crore and ESOP taxation. There were quite a few measures related to financing of small exporters, with comprehensive digital tax refunds.

ET CONTRIBUTORS|
Last Updated: Feb 03, 2020, 08.16 AM IST
0Comments
Agencies
Sanjay Nayar
The decision to improve corporate governance at the government level is a creative and welcome thought in particular as it relates to the Companies Act and the taxpayers’ charter as well as the specific one like the recruitment of non-gazetted officers.
By Sanjay Nayar

The budget was a pretty good attempt to address many issues facing different sectors, within the constraints of the fiscal space. Some measures that deserve to be called out include, among others, the overarching focus on doubling farm income and addressing entrepreneurial energy by setting up an end-to-end investment window. The fillip provided to the MSME sector is, in particular, well and deeply thought out. For instance, audit limits up to Rs 5 crore and ESOP taxation. There were quite a few measures related to financing of small exporters, with comprehensive digital tax refunds.

Prudent fiscal assumptions such as a nominal GDP growth at 10% for FY21, small increase in expenditure and muted growth in market borrowings are all positive measures slated to boost economic growth. While the revised fiscal deficit of 3.8% this year is well beyond what was budgeted, a well-executed fiscal plan and achieving 3.5% next year could well put us on a fiscal consolidation path. The key is the divestment blueprint like the LIC IPO and, of course, being able to spend the capex in a very focused manner and with multiplier effects in the private sector too.

Many attractions for foreign investors like investment into government bonds, infra and removal of the Dividend Distribution Tax are a pragmatic way to keep bridging the savings-investment gap at home. The key, however, is to develop a more robust bond market and open up local, long-duration risk capital from sources like provident funds, pension schemes and insurance funds.

That said, I would have preferred more specific vision statements on financial and banking sector reforms like good bank-bad bank, privatising the governance model of PSU banks (which are today amongst the few helping out the current credit and liquidity crises) and some specific target on infra asset divestments like NHAI, PGCIL, InvITs. There is a lot of demand for such assets and that should be an imminent focus for this government.

The decision to improve corporate governance at the government level is a creative and welcome thought in particular as it relates to the Companies Act and the taxpayers’ charter as well as the specific one like the recruitment of non-gazetted officers.

Overall, within the resource constraints, I believe this to be a very researched, consulted and diligent budget. The key going forward will be to execute well on capex, crowd in the private sector in infra and agri sectors and hopefully achieve some quick wins on divestments while gaining some breathing space on developing a higher local savings (investible) base.

(The writer is CEO, KKR India. Views expressed are personal)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

Also Read

Adani Group to stay with capex plan, says CFO

Companies see cash as king, cut capex plans

Companies see cash as king, cut capex plans

FDI is key source of capex funding

COVID-19: Capex cut by states to hit construction sector, says Icra

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service