Budget 2021 Live: Bold Budget That Depends On Execution, Execution, Execution: Uday Kotak
BQ’s top editors offer quick takes on key budget announcements as the Finance Minister speaks in Parliament.
KEY HIGHLIGHTS
Uday Kotak On Yields, Bad Bank, DFI And Execution
By Menaka Doshi
Just got done speaking with CII President and Kotak Mahindra Bank Vice Chairman Uday Kotak. Three key words he used to describe the budget...
BOLD: For taking the fiscal deficit leap and focusing on infra spend.
TRANSPARENT: For bringing off-balance sheet expenditure items on the books (like subsidies etc).
EXECUTION: Now to make this infra bet work.
Will yields harden further?
What will it take for a DFI to succeed?
What about the bad bank, rather ARC?
For Kotak’s answers watch the interview below...
Watch: Important Budget Numbers
The Customs Duty - Cess Swap
In an interesting move the Finance MInister has reduced the rate of Basic Customs Duty on a whole host of items while levying a new Agriculture Infrastructure and Development Cess on them. The FM says reasons are twofold, they want to collect additional funds for agri infra, without increasing the tax burden on consumers. Effective impact on each of these items has yet to be computed.
PS: Cess revenue is not shared with states.
Best Budget Day For The Markets Since 1997
The Bank Nifty-led uptick in markets today shows just how strongly investors believe it the budget is positive for banks and NBFCs. Jefferies says the budget stimulates growth/ capex, even if expansionary in nature and that is positive for banks, and the focus is on recap of PSU banks, resolution of stress/privatisation of PSUs as well as set-up of capex-financing vehicle, the timely execution of which is the key. It it not everyday that you see that the Bank Nifty gain 8%, its best performance since April 2020.
The Sensex thus got buoyed up by 5% points, the best budget day gains since 1997. Autos, metals and other high beta have bounced alongwith banks, with defensives like IT and Pharma sulking in trade. While the benchmarks did well, the broader markets did well too, with the top 10 gainers on the Nifty 500 clocking in double digit gains, and the space again being dominated by financials there. While there were individual losers like stainless steel companies, the larger picture is of a growth-focused budget, one which can help in the recovery in 2021.
Greater Reliance On Borrowings From Small Savings
The government has pegged the FY22 fiscal deficit at 6.5% of GDP or Rs 15.06 lakh crore. But market borrowings at about Rs 12 lakh crore.
How? For one, there is a big increase in the reliance on the National Small Savings Fund.
- In FY22, the government borrowed Rs 4.8 lakh crore from the NSSF compared to the planned Rs 2.4 lakh crore.
- In FY21, the government will borrow Rs 3.9 lakh crore.