We are also in the run up to the Budget 2021. What steps should the government take to impact the market positively?
The Budget is a unique opportunity for the government to leverage its position to be far more liberal in its whole approach and do something to support consumption. That is the area where people are feeling a little uncertain. Anything that the government can do to prop up consumption would certainly be a good idea.
This is one of those times between creation of new capacity and incurring capital expenditure. Interest rates are literally at all-time low. The last time we saw interest rates as low as this was in 2003 and it is interesting is not it that that was under the Vajpayee government. The Vajpayee government probably kickstarted one of the largest private sector capex cycles and we are again around the same rate of interest and liquidity is abundant. Can we now kickstart the private sector investment cycle one more time? It is very critical for creating new opportunities and jobs.
The government has already made some initial announcements in terms of PLI and including more and more sectors in that desire to focus on manufacturing. So I would believe concessions to support manufacturing, concessions to create more employment, even disinvestment would help.
The share of PSU institutions is perhaps the lowest ever. It is now standing at 10%, all the PSU market cap put together is at 10% of the total market cap of the market. Also, you will see that companies in which the government is a minority shareholder, is generating a serious amount of returns. Axis Bank, ITC, Hindustan Zinc are companies where the government sits in control and managing the affairs of the business are perhaps underperforming at this point of time.
Is there a cue for the government there to say we are better off being an investor sitting on the board, ensuring good governance of these companies versus being in management? Should this not be the time to initiate a big dose of divestment? The government has been promising that. Perhaps, it is a good time for the government to take advantage of where the markets are and the messages that are coming and start divestment. It will help everybody and at this point of time, it will also help them address the shortage in tax collections because of the pandemic and the contraction in earnings.
