Are you hopeful of seeing any major stimulus in the Budget or do you feel that it is largely going to be incremental?
I do not expect any major stimulus coming in from the Budget. This government has been very fiscally responsible and the fiscal deficit has always been a top priority for this government. I really do not expect any big bang stimulus from the Budget but I expect a lot of policy initiatives around growth and infrastructure space, especially physical infrastructure and third is a lot of initiatives which will further set the stage for India to be more digitally ready.
It is going to be more to initiate, facilitate and enable overall aggregate growth, physical infrastructure and digital infrastructure. These are going to be my expectations on the contours of this Budget.
Disinvestment was a big theme of last year’s Budget. Do you expect something on disinvestment this Budget?
I am not entirely sure. There seems to be a lot of buzz in terms of some new policy framework around privatisation and disinvestment. The Budget probably will go into the quantitative part of it in terms of what the government intends to raise through disinvestment and privatisation.
The number is going to be huge given that essentially this year nothing significant has happened. The target for FY2021-22 is going to be a combination of the target of FY21 plus FY22. The number probably is going to be significantly higher than what we have seen in the past.
Also that number is going to be encouraged quite significantly by two factors. One is that the government has made significant headway in terms of the progress and the modalities of divestment or privatisation which means either to identify the units to be privatised or the modalities of privatisation. It is going to be very encouraging for the government to significantly up the number.
The second important factor is a big bang divestment of something like an LIC where even a 10% or a 20% kind of a stake sale is going to mean a lot in terms of the numbers of quantitative targets. I think the Budget will deal with a significantly higher target for the coming financial year in terms of the proceeds from disinvestment and privatisation.
In addition to that, the Budget could hint at or directly make references to corporatisation of various state-owned undertakings of various government-owned undertakings which today are more like departments of the government but essentially the Budget could hint or directly refer to the corporatisation. For example, corporatisation of the railways means converting the railways from a department of the government to an independent undertaking or corporate undertaking. That itself could be a huge signal in terms of the government’s intent going forward.
In 2018 Budget, the market got hit because of LTCG. In the next Budget, there were taxes on dividend and the next Budget had taxes on buybacks. Anything else that could surprise or disappoint the market?
Honestly, that will remain a concern and especially if there is a Covid cess or some special tax on capital gains for the larger investors or entrepreneurs who are exiting their business. Any of these things will be negative for the market sentiment.
It is best if the returns or the savings or the investments are not incrementally taxed and it is left to individuals to decide the allocation and leave them with more ammunition to plough back into the markets or into their savings channels or investment pool. My view is any other new form of tax or incremental tax or raising taxes essentially will be negative in terms of sentiment.
