Union Budget To Continue To Whet The Animal Spirits Of India Inc

The budget is being presented in the backdrop of an expected global slowdown impacting Indian growth. Even domestically, consumer companies are indicating a slowdown after the festival season. Lending a helping hand to the population as it recovers from Covid issues would continue to be the focus. This is the last budget before the elections and while we expect continued focus on nation building and expect to see larger defence allocation given the geopolitical imperatives, it would require a tough balancing act given the focus on reduction of fiscal deficit as per the glide path. The revenue momentum for the government should be expected to slow down given the reduction in both the real economic growth and inflation in FY24 over FY23, making things more difficult.

In this backdrop, asset monetization could be the chosen route of the government. While many PSUs are slated to be sold and some work has been done in the past, that window may be rapidly closing, given the tight global liquidity which would make eliciting global interest or global fund raise by domestic companies more difficult. Securitization of stable revenue generating assets like roads could remain the focus. PLI schemes have been a success. More of the same should be expected to be rolled out in new areas.

Globe would continue to see monetary tightening. If our country has to continue on the growth path, it would have to find external funding. Expect to see more steady revenue generating assets being monetized by both the PSUs and private sector towards recycling the invested money. Also, growth has to be all across, in the domestic and in the external sectors. We are in the process of signing of a few FTAs. Maybe these would provide some more market access to our exports in a tough period.

On taxation, I believe it would be broadly a continuity. Do not expect any reduction anywhere given the revenue focus. In the past, we have seen capital gains taxation for unlisted equity and for bonds being converged with equity and more should continue to be expected in this budget (improvement in terms for others to equity terms). Moreover, once converged, setting off of gains and losses could become more seamless.

Overall, the budget is expected to continue to whet the animal spirits of India Inc as we as a country strive to achieve the goal of a USD 5 trillion economy over the next few years and claim our rightful place in the galaxy of nations.

(Prateek Agrawal, Executive Director, Business & Investment Strategy, Motilal Oswal AMC)