This has been an expansionary budget, something that the markets like and the markets are zooming to prove that.
In the runup to the Budget, the market stance was very precautionary and once people realised that there is nothing that is sort of negative from taxation perspective, it basically led to the rally, which I would say was due any way.
Obviously, it is an expansionary budget. A lot of things have been mentioned where lakhs and crores of rupees have been allocated. That is good. Obviously the debt market has been spooked a little because fiscal deficit would go up but if the US can live with a 15% fiscal deficit and other countries can print money, I do not see any reason why India should not follow it at least for the next couple of years because we are coming out of a very challenging kind of an environment. In a low interest rate regime, I am very sure that we will be able to attract a lot of flows and over a period of time, even this fiscal deficit would be brought back to sanity. So I think it is great. The Budget is, focussing on a lot of spending and more importantly it is planned spending rather than expenditure spending. It could not have been better.
What is next?
We will be back to earnings and cash flows. The good thing is there is continuity as far as the taxation policies are concerned. In fact, there were some very small announcements which showed the thought process about the government. There has been a little bit of tinkering with customs duty to ensure that production in India gets a boost. It was done predominantly to ensure that there is a level field and this whole focus on manufacturing in India really came out.
Along with the fact that now with this huge outlay of capital which the finance minister has laid out and it is not for one year, all the announcements were for three to five years. We have a road map of three to five years and that would lead to a big capital formation and a virtuous cycle of capex coming back.
I think what this country was lacking from 2011-12 to 2020-21 was a capex cycle building up and now with cement companies and steel companies and metal companies and even on the renewable power side, all of them are bracing for capex along with this huge push from the government towards infrastructure.
There is a possibility that we go back to the trajectory of 7-7.5% sustainable GDP growth. And if that happens, then this earnings trajectory for corporates might surprise on the upside and therefore this naysayers who say that Nifty is trading at an all-time high might change their views when they realise that on an FY23 basis suddenly Nifty starts to look at 18-18.5 times. So as I said back to earnings.