The Indian economy is in a sweet spot considering the fundamental parameters of the country. A recent RBI report showed that rural spending is increasing. And the robust corporate performance with around 90 per cent capacity utilisation points to good days ahead.
A maturing capital market with increasing addition of retail investors and increasing inflows into risky assets are pushing Indian corporates to raise capital and plan for expansion and diversification. Retail investors and domestic institutions have grown enough to absorb any shock from foreign portfolio investors in case of a global sell-off.
Now, all eyes are on Finance Minister Nirmala Sitharaman's seventh budget. Though we do not expect the government to deviate from the previous 10 years’ track record, she may accommodate the views of the allies and present a balanced, growth-oriented budget.
Indian economy is growing at a pace of more than 7 per cent. The young and talented generation is enthusiastic about the country's growth, as is evident from the growth of the startup ecosystem. FM may announce the budget proposals by considering these factors which can be a catalyst for the country's growth in coming years.
An area where we might see a major announcement is the direct tax proposals which may put more money into the pockets of middle-class and poor people of this country. Changes in income-tax slabs and tax rates may be introduced in the budget. The FM may also lay out plans to make the new I-T regime more attractive, while the old tax regime may get some additional benefits to tide over difficult situations due to increasing living expenses.
Tweaks are also expected on short- and long-term capital gains tax rates and holding periods. The long-term capital gains tax holding period for equities may be increased from the current one-year period to a new period aligned with other asset classes.
The government is pushing housing with various schemes; FM may announce increased tax rebates on housing loans and interest rates under section 80C to enable more people to have their own houses.
GST rates may be reviewed and rationalised wherever needed in sectors of importance to augment the growth. Bringing Petrol/Diesel/CNG under GST may be announced, but implementation is possible with the consent of the GST council, where the support of the states is crucial.
FM may increase the amount earmarked for capital expenditure to increase the capex-led growth in the coming years. The increased capex by the government is likely to nudge the private sector players to deploy their resources and start investing in the country by themselves and by Joint Ventures through foreign direct investments.
The Indian defence sector has recorded tremendous growth in the last 10 years, posted more than 30 times in defence exports, which is commendable. FM may announce more measures to strengthen the defence sector to make India one of the biggest defence markets in the world.
The railways sector is expected to get increased allocation for expansion, modernization and safety. Existing private sector companies along with public sector units under Railways may get the benefits from the budget announcements related to railways.
The power sector, especially renewable energy companies, SOLAR Power companies and WIND power companies are likely to be impacted positively by the budget announcements. The government is keen to announce more measures to increase power generation using renewable energy sources. FM may make announcements to propel the growth of the power sector which is inevitable for the country's growth.
The ports sector and shipbuilding may get priority and FM may make announcements to make shipbuilding in the country attractive for both public and private players.
FM may announce much awaited EV policy with incentives by tweaking the existing policies to attract more players and to utilize the opportunity. An announcement on EV bus policy is expected to increase the production of Electric Buses and policy changes to make Electric Bus more attractive and profitable for companies.
To incentivise Hybrid vehicle manufacturers, the GST rate on Hybrid vehicles may be reduced from the current 43 per cent to lower levels.
More announcements on semiconductor and electronic manufacturing are expected to make India one of the biggest countries in chip manufacturing and electronics manufacturing.
The manufacturing sector is one of the strong pillars of growth for any country. The reform measures and policy measures adopted by the government during the past 10 years have given a tremendous boost to the sector. FM may also announce domestic sourcing of parts and other services compulsory to give a fillip to domestic manufacturing companies.
As the data centre sector in India is growing at more than 11 per cent, nearly double the rate of the global average of 5-6 per cent, FM may make announcements to construct more data centres in the country.
Fractional ownership of equity shares may be announced to benefit small investors and to attract more retail investors to enable them for the financialisation of their assets and for more wealth creation.
The government is keen to monetise more Public Sector Units (PSUs) which may allow them to tap the capital market for funding needs. The FM may make announcements to enable PSUs to take more measures for value creation and would try to milk these firms rather than divest the stake in them.
With India's economy growing at over 7 per cent and a young, talented population driving innovation, the Budget proposals are expected to push for further growth and establish India as a strong, resourceful nation with competency in the coming years.
(Ramakrishnan is the MD & CEO of Sharewealth Securities Ltd. He is a SEBI (INH000010496) registered Research Analyst, having more than 32 years of experience in Capital Markets. Opinions expressed are personal.)
