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00:00Hello and welcome to Budget Countdown. We have got two trading days to go before we
00:15go into the budget with a big bang and from what it looks like number of sectors are looking
00:20very excited in anticipation of big announcements in this one and this one particularly has
00:25more significance than the others that we have seen and it is also the seventh budget
00:29of the Finance Minister. And a crucial one because it is happening at the start of the
00:35third term and at a point of time when the government has maths in its favour but also
00:41has some added responsibilities of state CAPEX and maybe some bit of consumption focus needed
00:51to be attended to. So it is an interesting mix but the math is clearly in the government's
00:56favour so it will be interesting to see how they utilize the math.
00:58The question I think is that is this budget going to show any kind of response at all to
01:04the election results where it was not exactly what the ruling party would have wanted,
01:10are they going to interpret that as a further push for welfarism. Anyway,
01:16let me just tell you what we are doing, all three of us are doing here on this show today.
01:18So we are going to speak to the NDTV Profit Think Tank. This is our collective of great
01:25minds, voices on what to expect from the budget and all of these great thinkers will be with us
01:32on the budget day as well. So we thought it best to sort of set the stage with them,
01:36see what they expect, what they are saying and then we can tally up on budget day to
01:41what has really been announced. So let me introduce who we will be speaking to today
01:44and the members of our esteemed Think Tank, A. Balasubramaniam, MD and CEO,
01:49Aditya Birla Sunlight with us. We will be speaking with Pranav Saita,
01:53Partner and National Leader of International Tax and Transaction Services at EY India. Manish
01:58Dangi, CEO and Founder at Mosaic Asset Management will be also giving us his views and of course,
02:05we will be speaking with others as well on the show. So let me begin actually with your take,
02:13A. Bala and you know, let's start from the market's point of view. Is the one big fear
02:21any kind of tinkering with capital tax? Because all things considered, can you hear me? Can you
02:29hear me? I don't think, I don't think A. Bala can hear me. Alright, so let me try and get him on
02:38for a second and then let me come to Mr. Pranav Saita on I think the big question on top of mind.
02:42If the push and the ask is to put more money in the hands of people, is there any chance that they
02:48would try and tinker with personal taxes? Do you think that they will succumb maybe to the
02:54temptation of capital gains tax? Does that seem in the realm of possibility with what you're
02:59pencilling in, Mr. Saita? So yes, on the expenditure side, I do think there will be a
03:06push towards consumption, towards more revenue expenditure of the government, a little more focus
03:13on revenue expenditure of the government than CAPEX has been for the last few years. But I don't
03:19think on the revenue generation side, from the taxation standpoint, I don't expect any major
03:25tinkering with the capital gains tax regime. I do feel on the personal tax side, which was the other
03:31question, I do feel there'll be some more money left in the hands of consumers, whether it is
03:37increase in the threshold limits for individual taxation across the spectrum, or whether it is in
03:43terms of a higher standard deduction for salary taxpayers. So I do feel some more money in the
03:49hands of personal income taxpayers, so that there is a consumption push. And it helps tackle
03:55inflation to these guys. And also I do feel that the capital gains tax regime will be kept by and
04:02stable. I wouldn't be completely surprised if on the short term capital gains tax, there is some
04:08tinkering, whether it is in terms of increase in the rate or increase in the period of holding.
04:13But largely for long term capital gains tax, I don't anticipate any major tinkering at all.
04:20Okay. Manish Dangi, let's start with that. The point that Mr. Pranav Saita made,
04:26is that a relief? Or do you anticipate or I mean, is the market working with an estimate
04:31of some tinkering in capital gains? And if it doesn't happen, it's a relief? Or is it a tape
04:36that is played nearly every single time ahead of budget, and therefore not really that important?
04:44No, it's the thing whose time will someday come. So it's just the train coming from the other side
04:52and it will hit you someday. It will more or less certainly hit you in this term of
04:59Modi government. It is not a local thing. It's a global consensus to tax the rich. And therefore,
05:10you know, would come but very likely given the mandate and you know, the priorities that may
05:16have changed for this government given relatively weaker mandate, I would say,
05:21I would agree with the gentleman that, you know, it may not come some form of harmonization in
05:26terms of, you know, various asset classes, having different different tenor for capital gain,
05:34long term capital gain, you know, could collapse into just one, which is could be two years.
05:38So that could come but, and of course, short term capital gain, but these are all
05:42sort of pure speculation. No one knows. This is I'm very certain of this that the capital gains,
05:48okay, pretty much all will actually will eventually get aligned will align with what
05:53Europe does instead of what US does. But again, there is a good news in terms of Trump likely
05:59winning and which is what markets are cheering in US also and you know, therefore it may get
06:04postponed by another four years until the next time the dams come. Hey Bala, you want to comment
06:10on that too? Do you feel like while they may not tinker with capital gains in a big way,
06:15arbitrage funds which is a very specific product offering may see some tinkering and the reason I
06:21ask you this because there is a definite need to shore up deposits for banks and fixed deposits
06:27have been struggling largely after debt taxation changed and arbitrage became popular.
06:31On contrary, we have been making a pitch that taxation, which was existing before
06:39in the fixed income product should come back. And given the fact that India needs vibrant
06:46corporate bond market in India, and so far, equity market has been helping the corporates
06:53to raise money at ease. A similar situation should be created as for the bond market
06:58as well. So that's something we have made a representation to our minister of finance
07:04that in order to develop a very vibrant capital market on the bond market side,
07:09we must bring back the taxation which was existing before for the fixed income schemes. And given the
07:15fact that mutual funds can create a huge impact and development of bond market as well in the
07:19past. As for the arbitrage fund concerns, I think from a government point of view, it's not easy
07:27decision. Given the fact arbitrage fund together, collectively, all mutual put together,
07:34will be managing close to about 1 lakh crores. And we provide relatively better security
07:42transaction tax for the government. Because the transaction, more the transaction happens,
07:47it provides actually a secure transaction tax. From the government point of view, by removing it,
07:52what would they gain? The gain probably will not be anything significant. And today,
07:58whatever has been done, arbitrage funds have been providing the much needed liquidity to the market.
08:05And second, it also has been ensuring that rate of carry forward is not very high,
08:12given the fact that the arbitrage funds have been primarily participating between the
08:17spot and the future. On top of it, revenue collections coming from the arbitrage from
08:21the government point of view is also quite significant. Therefore, I don't think they
08:25will tinker with arbitrage fund because it serves many purposes, which is for the stability of the
08:31market as well as for the government taxation point of view. So, as far as the fixed income
08:35concerns, my own belief is that we will see that coming. As some of the others were mentioning
08:39what Manish was mentioning, there's a high probability of what France minister has been
08:43often saying, there's a lot of confusion in terms of tax rates. It should be easy to understand.
08:49You wake up in the middle of the night, we can give what is the tax applicable for various
08:53instruments. And therefore, they want to bring in some kind of commonality. There's a high
08:57probability all the tax rates get aligned, either all in one or all in two or in three.
09:03When I mean all in one, it's capital gain tax for equity is one, real estate is two,
09:10and other classes is three. Therefore, there's a high probability they may get
09:16these things aligned as a single period kind of things.
09:20So, that might not necessarily be seen as a positive immediately for the markets that day.
09:25But then let's sort of set the context of what are the key markers that everyone's looking for
09:32in this budget. And we've tried to simplify it and we'll put that out for our viewers and of
09:36course, ask our think tank about it. Number one, are we going to see a big push for rural India?
09:42I think that's a no brainer in terms of a question, because you need those rural incomes,
09:47bottom of the pyramid incomes, just broadly more than rural to even come up to speed.
09:52This sort of RBI bonanza that the government has got, is that going to be pushed towards
09:57consumption? Is that going to be the priority or will it be capex? I think we've talked about
10:03the capital gains question in some detail. Will that be restructured? The consensus so far seems
10:09to be that yes, you might see something through the term, not necessarily in this budget.
10:14The other point that if you want to push manufacturing, will you double down on PLI
10:19schemes? Is it going to be more of the same because they seem to have worked to some extent?
10:24And of course, will there be relief for taxpayers? And will all of that once again,
10:29be pushed to the new tax regime? I think those are some of the key points. Should we just get a
10:34view on point number one first on the push for rural India? Manish Sanghi, I think this is one
10:41part where or one point where the finance minister might surprise by doing things at her own pace,
10:47and really not feeling that pressure to show like a lot is being done for the rural voters
10:57at the end of it and not really bother too much about those headlines coming out that
11:02big push for rural India. Do you think that we're misreading this?
11:08So there are two things here. One, voter isn't a constituency in this budget. You've sort of
11:15gone past that point already. You have elections coming. Manish, the reason I ask is two big
11:22state elections coming, both agrarian states. I know, I know, I know. So I'm getting there. I
11:26know that. So I'm saying, which is why two parts to it. So but a better way to address this is to
11:33do what let's say Maharashtra government is doing, you know, so launching a ladla bacha or ladli
11:40behna, or such like scheme. So the India is pivoting from actually central government doing
11:50largest to now central government sort of on lending to state government and they in turn
11:57actually addressing the specific need of their constituency. So I guess, you know, what budget
12:04would see is, would see is that, you know, maybe a lot of loans being advanced to many governments,
12:11you know, we'll discuss about what Andhra and Bihar package could look like, you know, some
12:16assistance to Maharashtra government to actually fund, you know, some of the schemes and ambitious
12:22schemes that they want to launch. And such like, for rural India, what exactly and directly that
12:28you could do, this government does not believe in except, you know, through subsidy and stuff
12:33like that. It's only through Kisan that you know, you could actually distribute some largest. So
12:39could that number go up? Totally possible. From 6000 to 7500. I thought of this even in the
12:46January speech, it should have happened, but it didn't happen. So I'm not very certain that the
12:53bounty that government has, it's about 160,000 crore, a lakh crore extra from RBI and rest
12:5950-60,000 crore coming in from better run rate of tax collections last year and this year,
13:05you know, that bounty will rather get distributed and other things that we should discuss later.
13:10Purely from rural standpoint, you know, really don't know exactly how and in what form, you know,
13:16can this be distributed, given the current methodologies that the government employs.
13:21You know, Manish, you make a very important point. Sorry, just to follow up there.
13:25The dole outs to state, I mean, I think this government seems to be following a model that,
13:31you know, the CAPEX as well in some portion will be done by the states and therefore give
13:35interest free loans to states as opposed to just giving a dole out to states. And part two
13:40is the thought, therefore, that whatever the state does in terms of largeness is not going
13:47to impact state elections as much, so rather not go down that route. So that's part one.
13:52But part two also, the CAPEX uptick, will that also be done by states as opposed to
13:59doing a large number because half of the FISC or nearly half of the FISC has passed?
14:03How much can you give more to an economy so that the economy can even digest it well?
14:11So, you know, look, you know, Indian government is not, and I've made this point many times,
14:15even on your channel, that, you know, it's not constrained for money, but constrained for the
14:19capacity to spend. Okay. You know, outside of just general transfers to people at large, you know,
14:24frankly, there are limited ways that the Indian government can spend, especially for the fact
14:30that, you know, CAG audits it once you've spent. So I guess states have better capacity. I think
14:36the Modi government realizes this, and which is why you have right now two major projects,
14:42you know, both in Andhra as well as Bihar. The blueprint is likely ready. They may have
14:47submitted it as to how they want this money to be spent. In Andhra, certainly because of Amravati,
14:52you know, a very, very large expenditure is planned. So I guess a CAPEX push,
14:58plus actually satisfying your partner, it comes in the form of, you know, government giving large
15:04loans, likely 25-30,000 crore, maybe more, to these states to actually fund, to do a lot of
15:12infrastructure bid. That's the likely path, you know, how government of India actually
15:19uses this 160,000 crore bounty. So you will actually in the end, see in the budget that
15:25there is a bump up in the CAPEX spend. A large part of it is not because Indian government is
15:30actually spending a lot of money, but it's actually on lending to the state government
15:35to one, facilitate this, whatever, you know, investments that they're making. Plus also,
15:42you know, some of the governments, you know, who could potentially use this for a dole out.
15:47We got your view on personal tax, but across industry, one of the key ask is to extend the
15:53sunset clause, which is a corporate tax rate of 15% for new manufacturing facilities.
15:59If India has to become the manufacturing hub, and extensively we've talked about how private CAPEX
16:05needs to pick up, do you feel like an extension of the sunset clause is very likely or almost a
16:09given in this budget? Pranav Sethia, that was for you. Yeah, so I do not think so. The government
16:17seems very determined. If you're talking of the 15% plus surcharge sales, which adds up to about
16:2317% corporate tax, which is the concessional tax rate for new manufacturing companies.
16:28I do not think they are inclined to extend that. Had they been inclined to extend that,
16:36I think it would have been done in the interim budget. A lot of sunset provisions, they did
16:40extend during the interim budget itself. This one, they did not. And based on our interactions,
16:45they seem very, very clear that they do not want to extend this 17% concessional manufacturing
16:51company tax rate. Yes, I do expect that there will be some form of flip to the manufacturing
16:59sector, particularly private CAPEX is something that needs some push for sure. So I do expect
17:05things like addressing the inverted duty structure to whatever extent they can.
17:10PLI will get a little more push. MSME financing will probably get some more push. And I do feel
17:17therefore that private CAPEX will be one of the things on the government's agenda.
17:22On your previous question, actually on rural, I do feel that on agri-infra side,
17:28both logistics and productivity push is something that they might invest in.
17:34And I do feel that housing in the rural sector is also something that they might really
17:40look at. So some form of rural push, I would expect in this budget as well.
17:46Now, the rural push is one bit, consumption is one bit and often, you know, we end up conflating
17:52it all in one huge concept. But the fact is that if you want to increase consumption,
17:57there are several ways to do it. Either you increase incomes or you reduce taxes and payouts.
18:03And the big hit is GST, which the budget cannot really do. It's not in their purview. So let's
18:08come to that question, Ebala. And let me come to you on that. How crucial is this consumption
18:14story? Because when we're speaking to large FMCG companies, they're talking about green shoots,
18:19turnaround, but saying, hey, we need a bigger boost. Just going with the flow is not going to
18:24help. In your view, what can the government do and what is finance minister likely to do?
18:31I think consumption is the large component of the economy, there's absolutely no doubt. And
18:36therefore it needs a special attention. But that attention cannot be given by giving incentive to
18:42the FMCG companies and so on and so forth. It can only help in increasing the demand coming from
18:48the people who are largely the consumers by giving more money in the hands of people.
18:52Therefore, one of the options the government may consider is increasing the tax slab.
18:57Currently, up to seven lakh rupees, you don't pay any tax. And then above that,
19:01there are tax slabs. Therefore, there is a high probability they may treat the tax slab
19:06structures. Therefore, say up to 10 or 12 lakh rupees, you'll have more money in your hand
19:12given the fact that the need for spending at every household has been rising, either it is for
19:18home furnishing or buying a home and so on and so forth. So lifestyle is changing. Therefore,
19:24the applies also the middle class income levels are also have gradually rising,
19:30more people getting into the employment side. So therefore, there's a high probability the
19:34tax slabs would undergo a change. As a result of changing the tax slab, it will probably have an
19:39impact across the taxpayers. Therefore, the consumption can get boosted. That's one.
19:45Second is earlier they talked about rural. Well, of course, rural income is dependent on
19:50agriculture. And there has been of late, the government has been spending more on infrastructure
19:56building in rural India, especially in the renewable energy, solar energy is now being
20:03the focus, area of focus for rural India. Every household in rural India can avail the benefit
20:12from the government of subsidies and set up your own panel of, say, what you call the solar energy
20:19panel. Therefore, whatever you consume, you consume and rest you give it to the grid that is
20:24being set up by the government of India, so they get additional income. So I think the focus that
20:27they have been having that increase in the income level for agriculturists in the country would be
20:31the focus, not necessarily it has to come in the form of increase in MSP, not necessarily it has
20:35to come in the form of other subsidies that they provide, where they already provided enough.
20:39Therefore, there won't be much room for that. But definitely they can increase the activities
20:44surrounding the rural India, which will of course provide employment, will also give additional
20:48income and so on and so forth. And including the canal development, I think water resource
20:52management has been another big area of focus. The government has not spent enough spending on
20:57these areas, which will ultimately benefit the rural economy as well as the agricultural economy.
21:02Therefore, some bit of increase in allocation could come on the capex side on this side as well.
21:06Apart from that, if you look at the overall basis, definitely the government has managed to mention
21:11that there is a good leg room that is available for the government on the fiscal side. Even as
21:16we move forward, there is a high probability, increased compliance on tax payables would keep
21:23increasing. I will not be surprised. The GST collections, it will not only cross, it will
21:27probably get close to about 2 lakh crores per month, it can become. Therefore, on the overall
21:32basis, they will have enough leg room for them to spend money by cutting tax rates rather than doing
21:39anything else. Okay, so maybe cutting tax rates, maybe making it great for the lower middle income
21:46class or the middle income class as well to have some more money. Actually, speaking of tax rates,
21:51Mr. Setha, can I come to you? One dire need to attract global manufacturers with even more
21:58vigor. We are doing well on the high-tech front, not as much on the low-tech front. One of the
22:02views that is coming in is that tariffs are not predictable, tax rates are not predictable,
22:07and global manufacturers do not like that. Can something be done in this budget print
22:13to make it more predictable so that we can attract low-tech jobs, which are more
22:19job generating, textiles, toys, what have you?
22:24Right. So, I think by and large, this government's hallmark has been a fair degree of stability,
22:31predictability in the tax laws, particularly on the direct tax side, but also to a large extent
22:37on the indirect tax side. I do feel that some of the inverted duty structure piece might get
22:43addressed, but other than that, from the indirect tax side, we do not anticipate any major steps
22:50that would change this particular pattern of stability. I do feel, however, that in terms of
23:00some of the other points that got discussed, yes, in terms of skilling, demographic, rural,
23:06there might be some spend around that, and to give more opportunities from an employment
23:12generation standpoint, some incentives could be expected, but not particularly in the indirect
23:18tax regime, as I see it right now, at least not through this budget.
23:24Well, Manish, I'm going to take that question of Neeraj and extend it into the other complaint a
23:30lot of global companies have when they come into India is that our cost of logistics are very high.
23:36So, globally, cost of logistics are 10 to 12 percent, India is anywhere in that 14 to 15 percent
23:41range. And we've seen over the last couple of months, the focus of the government or the focus
23:46of investors has been logistics, right? Aviation, railways, roads. Do you feel like, and this is
23:53going a little beyond the budget, if you're buying India for the next three years, would you still
23:58stick with the same theme of road, rail and highways?
24:01One, it's improved a lot in terms of our ranking. Two, Rome wasn't built in a day, so it takes time.
24:09Three, one very, very big achievement of Modi, one and two, is to pivot India to build East Asia-like
24:17infrastructure. And I think, you know, that is one of those very, very big success. And I think,
24:24you know, this budget next and a budget after that, what will succeed for a politician,
24:29you know, he must go after it over and over again. So, I think that will continue.
24:35I think our roads have improved quite sharply. Ports are actually beginning to improve. Capacity
24:40has risen dramatically. Railways, despite humongous investments, the quality as well as
24:46the capacity hasn't sort of improved as much. And I think, you know, that is one of the reasons
24:54of course, water, sanitation and a few other things at margin have grown, but
25:00nothing close to the dazzling growth that you've seen in the road infrastructure. So, I think it
25:04pivots to some of the other infrastructures, you know, could actually improve both life of a
25:13household, but also, of course, at margin. Manish, while this is sounding like a very
25:18holistic, qualitative answer, yes, India first, and we're all here for it,
25:23our civic sense needs some help. But that aside, what I was trying to understand from you is money
25:28to be made over the next three years in these sectors. Is this still a theme that could create
25:33significant wealth? I agree. I agree. You know, I mean, you know, anything,
25:39what you make money from is either valuation gains or earning gains. I guess it's very likely
25:45because of the push in these sectors, the earnings will grow. But as you see in many
25:50of these sectors, they're actually valued at 100x of the, you know, two-year out earning,
25:56one-year out earning, you know, difficult to make money in, you know, something very,
25:59very expensive, even though underlying sector or company do very well. So, the answer is not
26:04straightforward, but I guess, you know, the corporates will do very well in these segments
26:07in next couple of years. Okay. Ravi Dharamshree has joined the party. He's founder and CIO at
26:13ValueQuest Investment Advisors. Ravi, great to have you on. So, once again, for those who have
26:18joined in, this is our think tank and of course, Manish Sabharwal as well, who you will see with
26:24their views on budget days on NDTV Profit. So, we're trying to sort of understand ahead of the
26:29budget what they want and then we can tally up whether it's what we saw or not. So, Ravi, the
26:34quick question of why are we seeing nervousness in the market? So, let me come to the here and
26:39now. We have a couple of trading sessions left before the budget. And there seems to be a sense
26:45of maybe hedging bets. Is there a concern that there could be something adverse coming in on
26:52how equities are taxed, or maybe not enough to cheer on the markets further? I think we might
26:59be reading too much into a couple of days moment from the perspective of what holds in budget.
27:06I think the mere fact that we haven't corrected in a significant way for four years,
27:11and the valuations were running high is good enough reason for the market to take a step back.
27:16It's just that going into a big event and we haven't corrected, I guess that in itself is
27:23reason enough for markets to take some money off the table. So, I don't think we should read too
27:28much into it from the perspective of what's coming in budget. Okay. So, Ravi, to your mind, what is
27:35coming in the budget? What is the one thing that you are watching out for which you believe is a
27:39near certainty, capital markets perspective? So, from the perspective of where we are in the
27:45economic cycle, there are two ways to look at it, what's coming and what should come.
27:51What I would like to see is that the equity as an asset class should continue to be favored.
27:58Yes, we are facing some challenges on the banking deposit side, and some incentivization might be
28:03required, but it should not be at the expense of the equity markets is what I feel. Secondly,
28:07I think the slight tilt away from capex oriented sectors towards consumption oriented sector is
28:14what the monitorable is for me. How hard is that turn the government takes is something that I'll
28:19monitor because what the analysis of the election outcome and the upcoming state election is that
28:27the government, there is distress in the rural areas and that distress needs to be addressed.
28:33So, just doing supply side reforms and teaching people to fish is not going to work. There is a
28:39need to give a little bit of fish. So, how hard is that turn? Is it at the expense of fiscal
28:45discipline? Or is it something that the higher tax buoyancy and the RBI dividend can take care of?
28:51If that is the case, then I think the middle path would be a great outcome for the market.
28:57Hey Bala, I'll come to you as well on this. And while the list of needs warns is extensive,
29:04tell me what is non-negotiable? What should not happen in this budget?
29:11Definitely, the going is good in every, I generally call it as all cylinders are firing
29:17from the economy point of view, whether it is robust tax collection, whether it is robust
29:23vibrant stock market. And Indian, I think, people have never dreamt that they will rise
29:30equity capital from the market so easily. And today, it's available and abundant.
29:36So, that's something is a reflection of the optimism, reflection of conviction
29:40that everyone holds on the Indian economy, I think, which essentially has come on the back of
29:44stable policy, predictable, and ending with a very stable interest rate regime.
29:50And therefore, what should not be there is more cutting down some of the expenditures
30:00and increase the subsidies and so on so forth. I think that should not be coming in because
30:04the government so far, the last two terms have never done anything which is more like a waste
30:10when it comes to the question of expenditure. So, most of the expenditure has been more productive
30:15in nature, and that must continue. And though there has been a wider discussion about because
30:21of state elections and so on so forth, that they would probably take the route of giving more
30:26freebies. I think this expectation always comes with this government again and again proven that
30:31they don't take that path, they'll probably take the path of driving the economic growth
30:35to the next level and working towards a new economy. I think that should be the focus
30:40on the budget. So, okay. So, agreed. And I get that point, Ebal, I agree completely that time
30:47and again, the government is surprised in that sense, on the positive, positive and seen from
30:52the view of capital markets, that they haven't given into temptations of fiscal profligacy or,
30:58you know, populism, etc, etc. But one thing to watch this time, and I'm just going to quickly
31:02come to Manish on this question. Will this be a key factor to see how much of allocation to
31:08projects which big allies or important allies want? So, how much goes towards an Amravati?
31:14How much does Bihar get? Because these are also key allies, right? I mean,
31:18so far, everything has been gung ho and stable. But is this something that you would watch closely?
31:26Yeah, it's very likely a deal already. So, and it's likely a good deal. So,
31:32what has been UP for last five, six years, seven years, I would say would be Andhra and
31:36perhaps even Bihar. So, that will be for India and for all of us, it will be an additional
31:43incremental engine of growth. So, that won't be seen as a negative necessarily. And you're saying
31:49the deal is already done, the halwa is already made. So that's fine. But I'm saying so that's
31:54not going to be seen as a negative in terms of, you know, that there is a leverage to be used by
31:59allies. So that's, that's not a negative. Because remember, you're talking about UP, but they used
32:05to, they were running, they are running UP. So that's a different story.
32:11No, no, I mean, NDA is running Bihar and Amravati. So, in a sense, it's no different,
32:20you know, it's absolutely the best way forward that an ally actually trade off some constitutional
32:27positions, speaker positions for the development of the state and sort of we all as market
32:31participants should be very happy for this trade. And more importantly, there is a plan
32:37in the mind of the Chief Minister to execute a very large project, which he has, you know,
32:43which he did phenomenally until, until then he was shipped out of that job. So, in fact, you know,
32:49we did lend to Amravati projects long ago, did visit that it's a phenomenal project. And you
32:55know, it will be seen as what Chandigarh was seen 40-50 years ago. Entirely new city and could
33:01become a modern city for many other states that you know, you could actually end up having new
33:07capitals in many states if Amravati succeeds. So, it's a very, very good deal that what's happening.
33:13Could be interesting. Okay, my final question to Ravi Dharamshi, the big, the known elephant in
33:19the room or the big elephant in the room, actually, both actually, which is the FISC glide
33:25path, right? When S&P upped the outlook, they spoke about how India needs the center per state to come
33:31to sub 7%. Now, we know states are about 3%. So, center needs to be at 4%. Do you think they'll use
33:37this opportunity with the extra bonanza that they have to overshoot on the FISC number? Or will they
33:43just meet the numbers, talk about four and a half next, and then make let the market believe that
33:49they are on route for? The headline numbers clearly will maintain the fiscal glide path.
33:56I don't think the headline numbers will change dramatically. However, the devil will lie in the
34:02detail. And over there also, I believe this government has shown tremendous fiscal discipline,
34:10I don't think they'll veer from that path in a significant manner. The extra,
34:15you know, almost 1.2 lakh crores of dividend from RBI and another 40-50 bps of extra revenue
34:22through the tax collection gives them enough room to, you know, cater to their allies needs,
34:30cater to the upcoming state elections need and yet not veer away from the path of fiscal
34:37discipline. Manish, I know you want to come in, but I was actually asking that, can they actually
34:42beat it by 10-20 basis points, closer to four and a half? So, could that happen? Because we
34:49haven't seen that happen. But Manish, you were raising your hand, you want to come in on this?
34:53Very quickly, a market expectation and again, that's built by actually talking to a lot of
34:58folks in Delhi is 10 basis points further consolidation. So, I guess this is what bond
35:04markets are cheering for. Two, and I think Bala did talk of it, you know, this major confusion
35:10which lies in the mind of a banker at a conceptual level that, you know, if money goes to equity
35:16market or arbitrage fund, it means lower deposit rate. That's not the way banking or financial
35:22plumbing works. Almost all money, sorry, rather almost all money lends up in banks and therefore,
35:29even though you see in last two years, initially the conversation was that if mutual funds don't,
35:35mutual funds are getting a lot of money and therefore, clamp down there. So, the tax treatment
35:40to debt mutual fund, the SOPs are removed and yet what you see in last two years is
35:46very little deposit growth. So, this conceptual misunderstanding leads to a lot of these
35:51pathways that if money goes to equity market, therefore, at margin bank is losing. No, if money
35:56goes to equity market, it is still there in the bank only. Right. Ravi, one quick question before
36:03we have to start wrapping up the show is high conviction idea. So, what are the sectors and
36:08subsectors that you're betting on, which form a part of your core portfolio currently? And you
36:14don't need to give me stocks. I'm assuming there'll be a restriction there, but sectors, subsectors
36:18that the big bets are where the alpha is going to come from. So, I think before what to bet on,
36:23I think what is important to note is there are some sectors which are dependent on central
36:27government capex and those sectors actually face a risk. We might not be, there might be no increase
36:34in the capex from the central government side on the defense or on the railway side. So, those
36:40sectors and they have been the best performing sectors, no doubt about it. There might be some
36:46earnings momentum which carries them through, but I don't see incremental order flow to that sector
36:51or incremental allocation to that sector happening. So, those are the sectors which
36:56clearly face a challenge. Overall, I feel that ideally there should be some shift away from
37:05capital goods and such sector towards more, slightly more towards consumption and export
37:11oriented sector. One, primarily because these sectors have not done well for the last four,
37:15five years. And there is a valuation, if I can say the valuations are relatively better over
37:22there. Second, there are some green shoots beginning to appear over there. So, the risk
37:27reward from a three to five years perspective is more on the side of the sector rather than
37:32towards the capex oriented themes. Okay. Final question from mine to Mr. Seta. Mr. Seta,
37:39to your mind, based on your conversations with corporates around taxation or otherwise,
37:46and keeping the budget math in mind, what is it that you are watching out for?
37:50What is it that you think your client list is wanting from the businessman perspective?
37:59I think by and large, clients and the corporate sector is happy with the current tax regime and
38:05the stability thereof being maintained with not too much tinkering, not too much changes. I don't
38:11think there is a big expectation of some big stops to the corporate sector from the tax point of view,
38:17but certainly there is an expectation and hope that stability and predictability,
38:22which has been the hallmark of this government will continue. And of course, a big, big
38:27expectation that the way this government or this regime has managed the macro stability of this
38:34country, and that is across various parameters will be maintained. I think two big things that
38:41need to be addressed, of course, the food inflation and the rural growth, which are very muted. Food
38:45inflation is high, rural growth is muted. So something there. And I don't know, I mean,
38:51not much is being spoken about, but while there is enough both tax revenue as well as non-tax
38:57revenue that the government has, both from the direct indirect taxes side, as well as maybe
39:02non-tax revenue like the RBI dividend. I'm not too sure whether it's a bad idea right now, if any
39:09further funds are required and to manage the fisc better. It might not be a bad idea to really give
39:15a big push to PSU disinvestment at this stage. The valuations are really good. I think the market
39:22dynamics will do with some additional supply side on the capital market side, and it might be a good
39:28way to also shore up any government revenues, improve the fisc, and probably even give a push
39:34to some of the expenditure initiatives that might be required for various reasons that we already
39:39discussed. They don't seem keen, though, to disinvest anything. So is that in the bucket
39:46of I hope this happens, but I don't think it will. That's more in the nature of hope.
39:52That's more in the nature of hope, but I wouldn't completely rule it out. I think it might be
39:57a wise move in retrospect if the government were to look at it.
40:00Okay. So then let me ask that to Bala as well. What is in your list of I hope this happens,
40:05but it might probably not? I have a different argument on that. I think
40:10the government has become more richer with the increase in the value of all the public
40:14sector companies. And therefore, the richness of the government, not necessarily they have
40:19to divest, and therefore, we bridge the fiscal gap. Along the side, they also create a huge asset
40:25One point to that, everything is not an HAL. They also have an MTNL. It's not that everything is a
40:31jewel. One other thing which in my own belief is the asset that we have created, leave aside
40:37market cap, I think the asset that they possess, whether it is through the NHCI, or through the
40:43power grid corporation, or through other public sector enterprises, the asset that they have
40:46created can be monetized by way of selling to the pension funds. Asset monetization has been
40:51a big program that the government has been pursuing for the last many number of years.
40:55They have not done much on this space, and there is a high probability the largest FDA
41:00investment in the country from the pension funds could come in the asset monetization.
41:04And therefore, they will be able to raise enough funds. And that's one of the reasons I'm saying
41:08that probably the budget will continue to keep focus on the growth-oriented budget.
41:13And even the state that you talked about earlier between the Andhra and Bihar,
41:18on the contrary, it will probably add to the growth of the economy from the respective states.
41:22If you look at today, the aspiration of most of the states, Maharashtra is talking about $500
41:26billion, the economy, UP is talking about $1 trillion economy. Assuming the scenario of
41:33Bihar and Andhra Pradesh is such a powerful state, it can also contribute more to the
41:37broader economic growth. It will only add good to the country on an overall basis,
41:41even if they spend some money, which can be considered as compensation.
41:44I agree. I'm not saying it's a bad thing if they grow. The question is, did they have
41:52to allocate? I think that's the only nuance over there. Every state should grow. No question about
41:57it. But just one thing on the divestment, if a company is not a jewel, there won't be takers
42:02anyway. So that is part one. And part two, I just referred to the interview that Prime Minister
42:06Modi gave to Sanjay Pugaliar before the election. He was very happy with the fact that the PSUs are
42:12growing the way they are. And therefore, why is there a need to sell? I think we should get a
42:19quick view from Manish and Ravi on this, because it's turning into an interesting point.
42:25Come to Manish first on it. Do you think that divestment is on
42:29freeze? Or do you think that there is still some hope for it? And will we see that in the budget?
42:36No, governments are bad fund managers. They sell very cheap, and they almost never sell
42:41expensive. And which is why in some sense, returns are zero-sum. So markets make a lot of
42:47money because the government sells cheap. Because markets are very expensive,
42:51the reflex of the government is not to sell. So you don't think they'll sell. Ravi,
42:55what about you? What do you think? I tend to agree. I think they did a lot of QIP
43:01way back in 2020 and 21, when the stocks were not doing well. And now when the stocks are
43:08really, really overpriced, they are not thinking about doing. I think it's the smart thing to do.
43:12But unfortunately, I also fall in the camp that doesn't believe it will happen.
43:17You know, what's interesting is in the last six months, you've had 450 companies,
43:21promoters who've taken money off the table in the private sector. So this is the clear
43:25difference between the government who is a stakeholder who is enjoying the wealth,
43:30at least paper wealth for now. But thank you. Thanks a ton, gentlemen. We'll hopefully see
43:33you on Tuesday and continue these in-depth conversations. It's going to be fast-paced
43:38on Tuesday, but looking forward to seeing all of you.
43:42Well, that's our Budget Think Tank and you will get a sense from all of them on the budget day
43:46as well. But of course, thanks for tuning in on this very special show. And it's a goodbye,
43:52it's a wrap on from all of us on this one. But stay tuned to NDTV Profit for more such
43:57interesting conversations.