Union Budget 2012-13 announced by Finance Minister Pranab Mukherjee on Friday was completely silent on reforms. However, fund managers in the country feel that the announcements made in the Budget were on the expected lines. Some incentives towards the infrastructure sector will turn out to be positive for the Indian economy, some of them say. Here are their views:
Navneet Munot, Chief Investment Officer, SBI Mutual Fund
The Union Budget has delivered a net borrowing number which is larger than most market estimates. On the positive side, the fiscal arithmetic is realistic and seems achievable. The government has presented a more realistic estimate of expenditure growth as compared to the previous year. The intent to keep subsidy allocation within 2 per cent of the GDP is a positive while the lack of a more definite program of curtailing expenditure entitlements would continue to keep achievement of FRBM targets very challenging. The bond markets are likely to treat the budget numbers negatively in the short run.
The Finance Minister has attempted a difficult balance between growth and fiscal consolidation. The intent of fiscal consolidation is a welcome positive development. Continuation of extending incentives towards investments in infrastructure is good for the economy. Rising oil prices and their potential impact on subsidies may be a threat to the fiscal assumptions. The equity markets have been light at the event and with a major event been through – should take a breather at these levels.
Rajat Jain, CIO, Principal Mutual Fund
There are no major negatives with the budget. It is broadly on expected lines, and there are major surprises either way. The numbers for the fiscal deficit are more realistic than they were for the last year, and with the rise in excise duty and service tax rates, should not be too difficult to get to. The government has to focus on keepings its expenditure close to the budgeted number, with about 9 per cent increase built in the non- plan expenditure figure. The breaks given to the infrastructure sector and companies are welcome. The opportunity for FIIs to invest in domestic corporate debt is a positive, and may lead to a deepening of the bond market.
Gopal Agarwal, CIO, Mirae Asset Global Investments (India) Pvt Ltd.
The union budget announced today seems realistic, credible and is a sincere attempt towards achieving fiscal consolidation. It focuses on measures that will enable broadening of the capital markets, facilitating corporates to access funds through External Commercial Borrowings and Infrastructure bonds. There is a clear push towards propelling infrastructure development through reforms in sectors like roads, ports and power. We believe that the budget needs political consensus on big policy reforms for achieving the intended objective.
Akshay Gupta, MD&CEO, Peerless Mutual Fund
The budget trajectory is headed in the right direction. Despite baby steps, the fiscal consolidation exercise is positive for country’s
finances. A good announcement on Power, Infrastructure, Agriculture and cap on subsidies is positive. Increase in excise and service taxes and lower than expected targets on disinvestment will lead to continuity on a high- inflationary and higher interest rate regime. There is no indication GST and DTC roll-out, though expected, is surprising nonetheless.
Murthy Nagarajan, Head – Fixed Income, Tata Asset Management Ltd.
The total Gross borrowing programme of 5.69 lakh crores and net borrowing of 4.79 crores is higher compared with market expectation. The fiscal deficit number of 5.1 per cent of GDP is however more realistic. The borrowing programme will be front loaded, due to lower revenue receipts and higher redemptions in the first half of the financial year. The ten-year G sec yields may trade in the band of 8.10-8.60 per cent in the first half of the financial year.
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