It's just a few days left for the Union Budget and expectations are running high. Nirav Sheth, head of sales & strategy - Wholesale Capital Markets - Edelweiss Financial Services, feels the market would be looking at the whole package and not just one or two key announcements. According to him, the FM should focus on planned expenditure.
Edelweiss expects temporary relaxation on deficits to support growth. It sees the government accruing savings of 0.8 per cent of GDP due to lower oil prices and expects tax buoyancy, subsidies & boost to renewable energy sectors.
It also expects policy announcements on big infra push, renewable energy, power distribution reforms, roads, metro rail, Delhi Mumbai Industrial Corridor, along with those on direct benefits transfer.
Below is the transcript of Nirav Sheth's interview with Reema Tendulkar on CNBC-TV18.
Reema Tendulkar: What is the one key thing market should watch out for from the Budget?
A: The point I was trying to make is that it is not specifically one point; it is essentially the entire package that you want to look at. However, if you still have to zero down I think for us as well as for the market at large I would like to believe that it is entirely the focus on planned expenditure. Essentially how are you going to ramp up and ramp up significantly your spends across a variety of infrastructure projects. A lot of the focus will be also in terms of how much detailing you can give.
One of the things that I also want to make a point over here is that, the way I look at it is there is going to be a workable Budget and there is going to be a dream Budget and you have got to be somewhere in between. When I talk about a workable Budget it essentially means that you got about 90 bps of saving and therefore the FM will be very comfortable to try and ensure that about 40 bps of that saving, I am talking as a percentage of GDP figures, could be reinvested in what I was talking about which is entirely public spend.
Anything more than that, the challenge is that how would you try and garner more resources. For example you have been talking about the fact that can you essentially give a roadmap that you will be able to raise about USD 20-25 billion every year through divestments, securitisation of toll receipts, setting out lot of land assets and then try and figure out how do you want to ensure that you spend the same amount of money on significantly higher outlays on roads, airports, inland waterways and so on and so forth.
So, the difference is that you have to do the same thing that you have been doing but you do it on a much larger scale and more importantly you have to convince the market that how are you going to execute it. So, finally it is all about getting growth back in the system.
Reema Tendulkar: Give us some numbers to asses whether the Budget has done enough by way of concrete proposals to kick start the infrastructure revival? You spoke about planned expenditure, give us some numbers to judge and assess the Budget when it comes out. How can it be quantified?
A: The way to quantify is the size of the outlay that you have got on planned expenditure. I would not remember all the figures but the point I am trying to say is that for example if we are targeting a fiscal deficit of 3.6 per cent, I will be very comfortable if you try and say that you are willing to go to 3.8 or 3.9 per cent as long as that spend is being capped to try and increase the productive capacity of the economy.
You are not spending on subsidies, you are not spending it on doles, you are trying to ensure that my long-term economic growth so as to call the productive capacity is being increased. I would tend to believe that that is a critical thing. Outside that like I said it is all about can I raise $10 billion and can I spend $10 billion? When you are talking about Rs 60,000-80,000 crore of incremental spends that adds up to another about 60-70 bps. I think a fiscal stimulus in some form, averaging about 1 percent of GDP would be a very good enough figure.
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