Vinay Ahuja, Executive Director at IIFL Wealth

Last year we were in the middle of a pandemic and despite vaccination offering a glimmer of hope, the prospect of growth remained weak at best. Taking a signal from the applicable environment, the government, in its last year’s budget, draws its image as a stikler about a fiscal deficit and makes a clear statement about growth. This attitude coupled with a substantial yoy increase in Capex for FY22 took a lot on the market with surprise. However, this also serves to increase basic expectations. In accordance with the RBI survey, consumer sentiment in India is at seven-year low and is one of the weakest among major global economies. Adding the fact that we are at the height of important elections and expectations for some steps to increase consumption is rampant. Some of our expectations of this year’s budget throughout certain key sectors are:

Finance

The privatization of Bank PSU announced in the budget last year continues to be a business that has not been completed because we have not seen the material progress on the front. This year we can hope to announce relevant changes in the Banking Act and named candidates for privatization. On the other hand, we did not expect to see material infusion in the PSU bank. Most PSU banks are now out of the company’s quality asset cycle and generate healthy profits. Furthermore, some of them have also been able to raise capital from the market in the past. Thus, we do not think that the recapitalization of Bank PSU is likely to be high on the government agenda.

Infrastructure

Considering that we have not come out of the shadow of a pandemic, steps to increase infrastructure growth, unlock demand, and revive the economy tends to bear the main place on the government agenda. Thus, we hope to see the increase in government capex. Furthermore, we expect some announcements about funding new financial development banks, which are very important to meet the needs of long-term financing from new infrastructure projects, jammed, and sustainable. A long time of pregnancy from infrastructure projects make banks and other institutional lenders varies, so that it dryes the pipe funding.

In line with the government must also announce incentives such as depreciation acceleration to start the private capex. The government can also increase private sector expenditure further enhancing the PLI scheme (production related to incentives) for the new sector. We also hope to see some of the growth of defense spending and the SOP to provide encouragement in the ‘Make In India’ program. Some of the main surprises can be in the form of unique infrastructure financing steps such as possible tax amnesty bonds or provide a tax sentence on infrastructure bonds.

Health

Health will continue to hold famous places in this year’s budget. We hope to be able to see incentives that will provide incentives about sustainable investment in expanding complex fire capacity (active pharmaceutical materials), biopharmaceutical, and medical devices. Furthermore, the government can also heed the industry request to reduce import duties on medical devices to increase access to affordable medical equipment in the ecosystem. The increase in allocations for the Ayushman Bharat scheme can also be the main feature of budget allocation for health care this year.