Budget 2020: Government Has Done Whatever It Could Within Its Constraints, Says Kotak AMC’s Shah

The government has delivered “whatever it could” on the consumption, expenditure, trade balance and investment fronts—the four functions of growth in an economy. That’s according to Nilesh Shah of Kotak Mahindra Asset Management Company.

“Overall, the government has delivered [a budget] within its constraints though people’s expectations were higher,” said the managing director and chief executive officer of the country’s largest AMC. The government has invoked the escape clause in the Fiscal Responsibility and Budget Management Act to reach the maximum permissible limit on the expenditure side and also imposed import duties to keep a check on the trade balance front, Shah said.

This comes as Nirmala Sitharaman presented the Union Budget for the fiscal year ending 2021 on Saturday. The government pegged its fiscal deficit at 3.8 percent for the ongoing financial year against the earlier estimate of 3.3 percent.

No criminal liability across civil acts including the Companies Act and a proposal to strengthen the enforcement of contracts similar to the Insolvency And Bankruptcy Code will drive investments into the country, Shah said.

Will Market Dynamics Change?

Shah said India’s market sentiment also depends on how global investors react to the Coronavirus outbreak in China and not just the budget. “If a foreign investor is taking money out of China and India becomes the preferred choice if he would like to redeploy that money.”

He, however, said the situation is difficult to take a call on. The probability of foreign participants pulling money out of emerging markets overall due to risk-aversion cannot be ruled out, he said.

China’s benchmark index CSI 300 plummeted 7.9 percent, the biggest intraday slide in over four years, to close at 3,688.36 on Monday.

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