Indian Union Budget 2021-22: The FM hasn’t wasted a crisis and presented a bold development-oriented price range. This is a bet on India’s story playing to its destiny. At a time when the globe is awash with liquidity and low returns elsewhere, the strategic thrust on asset monetisation is excellent.
The price range has enabled the capital flows at each ends of the threat spectrum. On the one hand, promoting stabilised infra assets to feed the appetite for international yield investors, and on the other creation of a improvement finance institution to fund the improvement of assets is a good move. Global investors have not been comfy investing in beneath improvement assets so this is the proper strategy to monetise assets and reinvest.
The bold statement of intent on listing LIC and privatising at least two PSU banks is a clean break from the previous of pussyfooting about sensitive concerns. The acknowledgement of other liabilities and pegging the fiscal deficit at 9.5% is a further instance of the no-nonsense strategy.
The planned monetisation of idle land and other assets like sports stadia affords a good chance to rethink urban arranging and make cities far better and more equitable. The monetisation of such “dead capital” and improvement of these will spur financial activity resulting in a multiplier impact and give a additional increase to the Real Estate Industry.
A new asset reconstruction business (ARC) to aggregate non-performing asset (NPA) from banks is a major increase to resolving stressed assets and will accelerate the NPA resolution. Consolidating NPAs in one ARC will considerably assist selection-creating and coordination. The strategy to sell NPA to an alternate investment fund (AIF) will attract the stressed asset funds and revive the providers or make assets more productive. While information are awaited, proper execution and synchronising tax laws is essential to the good results of this concept.
The amendments proposed to allow pooled investment cars to leverage and operate is a major increase to REITs and INVITs and will allow the government programme of Infra asset sales. With the banks getting freed up from NPAs, they can get down to the enterprise of offering credit to cars like REITs and INVITs as nicely.
The nominal GDP development assumptions of 14.5% is indicative of the bet on development and consequently income buoyancy. If these assumptions do not play out and the execution on the above plans is tardy, we might run the threat of larger inflation and interest prices, which could spoil the party. This price range needs good execution (anything which we are not identified for) to fulfil its promises. However, the current superb handling of Covid and the a variety of contingency plans give me hope. In summary, this price range based on Aatmavishwas to be Aatmanirbhar which requirements to be followed up with good execution.
(Srini Sriniwasan is the Managing Director of Kotak Investment Advisory Limited (KIAL). Views expressed are the author’s personal.)