After the first budget of the Modi 2.0 government presented by Ms. Nirmala Sitharaman, we have across a few worries from the investors.
But, we would always urge investors to look at the bigger picture instead of being worried.
Let me start with the kind of worries we’ve heard:
No big bang reforms – There was absolutely no mention of a new idea or new reform in the budget.
Oil will become expensive – The government has suggested an increase in the excise on petrol & diesel which will make them expensive by Rs. 2 per liter.
LTCG still exists – The government has taken absolutely no steps to get more investors investing in the share markets.
Income tax stays the same – The salaried class is left little disheartened with the government not reducing the tax burdens on them at all.
No money given to NBFCs – The NBFC sector has not received any grants or special benefits from the government – they will continue to remain in stress.
Not done anything for the auto sector and increased subsidies for EVs – For the slowdown faced by the auto sector over the last couple of months, the government has taken absolutely no efforts to revive the sector. They should have reduced the GST on auto sector from 28% to 18%. And on top of that, they are providing subsidies to Electronic Vehicles. This will further put the auto sector under more stress.
3.3% fiscal deficit mark may not be met – With the plans that the government has, it doesn’t look like they will be able to achieve the target set by them.
As we always say – look at the bigger picture and not get entwined in the smaller things:
One should not ignore the green shoots in the Indian economy. The economy was at around $ 1.85 trillion in 2014 and has now become around $ 2.7 trillion. This is a growth of almost $ 1 trillion in the past 5 years. The Indian economy took 55 years to reach the first $ 1 trillion mark and now it has added the last $ 1 trillion in around 5 years. The FM in her speech said will be touching the $ 3 trillion mark this year itself and the $ 5 trillion mark over the next few years.
Reforms like GST, RERA, Bankruptcy code and more have been brought in place over the previous tenure of the government and they shall reap benefits over the coming decade.
India has been the fastest or the second fastest growing economy over the past few years and has shown all indications to become the fastest growing economy in the years to come, thanks to the reforms implemented over the past few years.
The Direct Tax collection has gone up from Rs. 6.38 lakh crore to Rs. 11.37 lakh crore – a straight 78% growth in the past 5 years. And yes, this is despite the slow year in 2018.
The government has suggested that it would be spending around Rs. 20 lakh crores every year over the coming 5 years for infrastructure development in India. Spending of Rs. 100 lakh crore is surely not going to be small spending and India will most definitely be reaping rewards of this spending in the decades to come.
The spends on infrastructure will be spread across aviation, roads, waterways, sanitation, drinking water availability, electricity, affordable housing, railways, urban metro rails, gas grid, etc. This means that the government is focusing on the overall development of the country.
The FM has again during her budget speech stated that the government is focused on the housing for all target by 2022. This means that the government will be building around 1.95 crore homes over the coming 3 years.
For the PSBs that have suffered a bit over the recent past – with the cleaning of their books taking place over the last 1-2 years, the government has proposed an additional capital to the tune of Rs. 70,000 crores to boost credit.
For the NBFC sector, FM said that the fundamentally sound NBFCs will get funding from banks as well as MFs. Along with this, FIIs and FPIs will be allowed to invest in debt securities issued by NBFCs and the government has given a one-time six-month partial credit guarantee to PSU banks for purchase of high-rated pooled assets of financially sound NBFCs amounting to Rs. 1 lakh crore in FY20.
For investors, they shouldn’t be forgetting the fact that the Nifty grows to approximately double every five years, and this has been happening only when the transformation process of the Indian economy by way of reforms is underway. One can just imagine the pace of growth once the rural Indian market opens up and the benefits of the reforms are achieved.
And hence – I will urge you, dear investor, to think, do you want to stay stuck with the potentially small and short term opinions or look up to the great potential the Indian economy has to offer to all of us? Probably, you know the answer to this!