Industry Leaders React: MSME, Education Loan, and Capital Gains Support In Budget 2024 | NDTV Profit
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00:00You also have with us Hiren Vair, Director and CIO of Alchemy Capital Management joining
00:05in.
00:06Hiren, what are your thoughts after this budget?
00:08Are you disappointed with what's happened on capital gains or are you impressed that
00:13we've, you know, pulled off that fiscal consolidation number better than what the street was expecting?
00:18All in all, good budget, bad budget?
00:20Well, I think on the whole the budget is good.
00:25Obviously for market participants, the increase in capital gains tax is a sentiment dampener.
00:32Yes.
00:33I mean, over a medium to long term, these things get evened out.
00:38You know, if you go back and look at when the 10% long term capital gains was introduced,
00:45you know, obviously there was an impact for a short period of time, but then everybody
00:49adjusted to it, right?
00:51Well, I mean, our sense was that there was no overarching need to raise resources and
00:58therefore tinkering with capital gains tax.
01:00But I think if I were to read between the lines, my guess is that given that capital
01:09markets were competing fiercely with bank deposits and the worry that, you know, the
01:16regulators and the government had was that, will this skew savings substantially in favor
01:23of capital markets versus other instruments?
01:28I think this is probably to kind of calm down and cool down the markets a little bit because
01:35there was a kind of a runaway rally in the markets.
01:40In my view, longer run, it really doesn't matter.
01:43But in the very short term, it is definitely a sentiment dampener.
01:47Hiren, just want to understand to what extent it's a sentiment dampener.
01:52I mean, the tweaking on STT for futures and options, perhaps not as bad as what was expected.
01:59No, I don't think that the increase in STT on futures and options is a dampener because
02:05frankly speaking, that was expected, right?
02:08And I think that, you know, something was supposed to happen there and I think it has
02:14happened. I think the dampener is really in terms of tinkering of the long term capital
02:19gains tax to 12 and a half and 20 percent, which was not expected.
02:26And therefore, to some extent, this could be a dampener in the short run.
02:30But as I mentioned in the medium to long term, people adjust, market participants adjust
02:35and move on. And I think that's what will happen.
02:38Outside of that, outside of that, and I think that what the government has done is that
02:45used the additional resources that they have to reduce the fiscal deficit, which on the
02:53whole should be positive for the economy because it reduces your cost of capital.
02:59And secondly, I think that they have given some support, you know, to
03:05to human capital right across the board and also by reducing custom duties on a few
03:14products. And we'll have to see the fine print.
03:16The idea is to promote value addition and reduce the cost for local manufacturing.
03:21So I think broadly, having kept the capex number at what it is, they continue to do the
03:26heavy lifting. They've used the additional resources to help, you know, give a little
03:32bit of a flip to consumption, which is not bad.
03:35So you have a little more balanced growth.
03:39And I think broadly speaking, also removing angel tax is a great step because, you
03:48know, you need new entrepreneurs and they need risk capital.
03:53So I think broadly speaking, the thrust of the budget is fairly good.
03:57I don't think the budget is bad.
03:59I think it's just that, you know, all capital markets players don't want taxes to go up.
04:05Let's be realistic.
04:06Right. No, no, no one likes to be taxed.
04:10No one likes to be taxed.
04:11And capital market players have always been very clear that this is still nascent.
04:17You need to get more investors on.
04:20Don't tax. Have we reached that inflection point where the government feels comfortable in
04:25increasing taxes on capital gains?
04:28Looking at the huge gains people have made as well.
04:30But hold that thought.
04:31I just want to get in Rajiv Anand, deputy MD of Axis Bank, for his first take on the
04:36budget. Rajiv, welcome.
04:38Great to have you on NDTV Profit.
04:40And, you know, just to understand from your perspective, the support given to MSMEs, the
04:46support given for educational loans.
04:49How do you see all of these measures in a broader view?
04:53Firstly, I think notwithstanding the whole issue of increase in capital gains, which
05:02obviously, you know, the markets are a bit disappointed.
05:06But the way that I think about it is, it has been, you know, all your viewers have made a
05:11truckload of money over the last few years.
05:14You're taking a little bit of that little bit of that gains to support two things.
05:19The angel tax to create more entrepreneurship and, you know, money in the in the middle
05:24class pockets. And I don't think we should be we should be too too bothered with that.
05:30Maybe in the short term, yes.
05:31But I think in the long term, I think that allocation of resources, I'm quite comfortable
05:36with. There is focus on on job creation, particularly through the MSME sector.
05:42And I think if you look at bank balance sheets, the size of the books of lending to
05:48MSMEs has only increased and increased quite strongly over the last three to five years.
05:53And my own belief is, is that the MSME sector will be over the next decade what retail
06:00was over the last decade, you know, for banks in terms of the ability to lend to these
06:06entities because of the entrepreneurship that they bring, because of the infrastructure
06:11that is getting built, more and more transparency through GST, digital, et cetera, has
06:16made many of these entities a lot more bankable.
06:19And therefore, the fact that there is greater trust on the MSME sector is quite
06:24heartwarming. As a banker, I think educational loans, you know, addresses the whole
06:30issue of employability.
06:32And I think, you know, there was a headline in in this morning's newspaper as well from
06:36from the economic survey that many of the graduates are, in a sense, not employable.
06:41And I think that is that is a problem that corporate India, you know, faces and has been
06:46a big issue over the last few years.
06:48And therefore, being able to to fix the employability and therefore be able to, you
06:54know, fix employment as we go forward, to my mind is is a very positive step.
07:00Rajiv, Mr. Anand, it's also Samina joining in.
07:04Were you pleasantly impressed with that fiscal deficit number coming in lower than 5
07:09percent and the glide path where we are talking about a sub 4.5 percent next year?
07:15Do you feel like all this put together makes this budget a bond budget and also could in
07:20the near term now in the foreseeable future help India's ratings improve, which will
07:25benefit institutions like yourself for sure?
07:29Oh, absolutely. I mean, I think the previous speaker spoke about the fact that this is
07:34going to push the cost of capital down, you know, for corporate India.
07:38And I think that notwithstanding, you know, the market's grumbling today is very
07:43positive from a long term perspective.
07:46You know, we've all spoken about the fact that large fiscal deficits have crowded out
07:50in a private sector, investments, et cetera, that that to my mind is going to be less of
07:55an issue as we go forward.
07:57And, you know, all the good things that you spoke about, you know, the fact that we
08:02have shown commitment to this fiscal glide path should impress foreign investors and
08:09certainly should impress rating agencies abroad as well.
08:13And that in turn will once again bring in both liquidity and lower cost of capital for
08:18this country.
08:21OK, so, you know, a lot of positives coming in, I don't know, on a broader view,
08:27Mr. Anand, I just want to get your sense of all the five, six policies to boost
08:33employment. And the focus is also on employers, incentivising employers.
08:38There's an internship scheme which is applicable to the top 500 companies, obviously
08:44your company as well.
08:45Government will pay five thousand rupees, the intern will be paid five thousand rupees a
08:50month, one time six thousand rupees.
08:52From what I heard, the private sector has to give 10 percent of it.
08:56How do you look at some of these schemes?
08:57Do you think they're implementable first off?
09:01So first and foremost, I think the budget is growth oriented as a bank, the fact that
09:08the economy is being prepped to grow at an even faster pace, I think is good for
09:15business, both on the deposit side as well as on the asset side.
09:18So I think that's the, you know, sort of the overarching philosophy that I first want to
09:22put out. There's a lot of detail in the budget one will have to go through.
09:28But as we have seen in many of the budget proposals over the last many, many years,
09:34implementation is always a challenge and how the government engages with the
09:41corporate sector to be able to implement many of these schemes is something that we
09:46will have to certainly wait and watch.
09:49Well, I think the big story, though, I think is what INY has just picked up for us.
09:56Mr. Mayusha is joining us in the stories, but we'll come back to that in a minute.
09:59Navneet, what is your portfolio view now?
10:03The budget is behind us.
10:05It seems like it's largely in line with what we were expecting, even though the push
10:10on Capex agri-consumption is not as much as we'd have liked or the street would have
10:15liked. There's tinkering on capital gains as well.
10:17If you're a market participant sitting with cash on the sidelines, what should one do?
10:23No, I think the broader direction of sustainable growth, inclusive growth, focus on
10:29innovation while keeping the fiscal prudence has continued, and all of this is good in
10:33the long run. Think about it, over the last five years, the Capex has almost tripled.
10:38The central government Capex has almost tripled from 3.35 lakh crores to 11 lakh
10:43crores. And now incrementally, it looks like government want to spend more money on the
10:48rural economy, which is actually good because a large part of the population is there and
10:52we need to invest more.
10:54It looks like government want to focus a lot more on employment creation, which is very
10:58good. We need to reap the benefit of demographic dividends.
11:01So both for consumption as well as from an investment perspective in your portfolio,
11:07there would be opportunities.
11:09Very interesting. Rajiv Anand, one final question and then I have a question for Hiren
11:14Vaid as well. And this is Neeraj here.
11:18I heard you mention about the overall good budget, focus on jobs, so on and so forth.
11:24Is there a tilt towards giving this much needed impetus to consumption?
11:30All job focus gives that tilt to consumption in any which ways.
11:34There are for skill developments, etc., also money being put on the table.
11:39Do you get the sense that it is a budget in that sense tilting towards consumption as
11:45opposed to an overarching focus on Capex, which continues as is?
11:52It's a little difficult question, and I think that's the bet that the finance minister is
11:57making. But I just want to leave a thought on the table that we are seeing relatively
12:06weaker consumption in an environment where net household savings are actually relatively
12:13weak, meaning that despite the fact that households have levered themselves up quite
12:19strongly over the last four to five years, we're seeing a situation where we're seeing
12:26consumption relatively weak.
12:28And so, therefore, the savings that is going to come through either better jobs because
12:34they are skilled better or because of some of the tax breaks, whether that will go to
12:39reduce leverage in households or whether it will go to consumption is something that we
12:48will have to certainly wait and watch.
12:50But I think the bet is that all this will ensure that we will see improvements in
12:55consumption. Rajiv, we'll leave it at that.
12:59Thanks so much for taking the time out and really being with us today.
13:02Navneet, take a moment, understand I have to let you go.
13:04So thank you for joining in as well and giving us your thoughts.
13:07Really appreciate your time today.
13:09Hiren, the market's not as disappointed as you would think when a capital gains tax
13:18hike would happen, because most people are saying this is not the greatest of times to
13:22do it, so on and so forth.
13:23Is the market taking heart from the fact that this was anyways going to come good, it's
13:28done in the first term, but it's being accompanied by fiscal prudence, which will
13:32help maybe in ratings at some point of time in the future and shows the bent of the
13:37government that they are not resorted to populism in a very large scale?
13:43No, absolutely. I think the fact that they've signaled 4.9 percent fiscal deficit and
13:524.5 percent next year is a very clear signal to the rating agencies that we as a
14:00country are very serious about fiscal consolidation and that we are aiming for a
14:08much more sustainable advantage in terms of ratings upgrade and the resultant
14:13reduction in cost of capital that can happen.
14:17And that itself is a growth enabler, if you ask me, right, so rather than relying every
14:25year on the budget to stimulate growth, I think if we do things which are more
14:30structural in nature, which reduce our cost of capital in a durable manner, I think
14:36that's a better outcome than trying to use the balance sheet every year to spur growth.
14:44Right. And as you rightly mentioned, that they've done this without actually taking
14:50the pedal off CapEx because they've kept the CapEx same.
14:53And I want to bring another perspective while, you know, there was an expectation
14:57that the CapEx number would increase slightly because the government has a little
15:02bit of resources.
15:04We must also mention that there is a lot of money which has been set aside for Bihar
15:09and Andhra Pradesh for infrastructure.
15:11Right. So there is a new power plant coming up.
15:15There is the Polavaram irrigation project.
15:20So I think that that money, whether it is for tourism, whether it is for power, whether
15:27it is for roads, whether it is for other infrastructure in these two states, also means
15:35that it is CapEx, right?
15:37So to that extent, I think that they've been able to bring up these slightly more
15:48struggling sectors and areas that needed focus, like job creation, skilling, without
15:56taking the pedal off CapEx and hoping that now the private sector will start to kick
16:04in, which actually has already happened because if you heard the CEA say that private
16:09CapEx has already gone up 20 percent.
16:11Yeah, it has. The top firms have, maybe the bottom ones haven't.
16:13But Hiren, you spoke about the renaissance of private CapEx way earlier.
16:18It's showing signs. Thank you so much for joining us on the Budget Day and giving us
16:21your thoughts as well. Really appreciate your time.