Amid the raging Omicron variant of coronavirus, all eyes are on Finance Minister Nirmala Sitharaman’s fourth Union Budget, to be presented on Feb 1. The disruptions from the pandemic weighed heavily on India’s fiscal metrics last year, with the central government’s fiscal deficit rising to an all-time high of 9.2% of GDP in FY21. However, the story changed in FY22 with a better-than-expected tax collection. Subsequently, the deficit this fiscal is likely to be around 6.8% of the GDP. Now, as things look relatively promising from growth perspective, some reduction in pandemic-related spending could be on the cards. Besides, tax buoyancy may further allow the government to go for fiscal consolidation this year.
That said, the Indian economy remains fragile and growth, volatile. Therefore, markets expect the government to roll out more supportive schemes for agriculture, the rural economy, micro, small and medium enterprises and social sectors to provide for income generation. But before we get into the details of the budget wishlist, let’s understand why the onus of the economic recovery could be solely on the government this time. As a result, markets expect a substantial increase in public expenditure by the govt during c2022. Against this backdrop, Hemang Jani, Head Equity Startegy, Broking and Distribution at Motilal Oswal Financial Services, lists two areas that market will eye. VK Vijayakumar of Geojit Financial Services also says that along with these announcements, the markets will also eye a clear roadmap for fiscal consolidation. Hemang Jani of Motilal Oswal further believes a clear indication of financial stability could be the only gift to investors this Budget. He also believes markets may see a steep rally if there is any announcement by the govt that simplifies market participation, provides growth framework, and streamlines capital market activity. Coming to the Budget Wishlist, Hemang Jani says investors want reforms for start-ups and boost foreign investments in the sector. Overall, markets have pinned hopes on the FM to announce a Budget that provides consistency in reforms, is pro-growth, and assures financial stability in the country.
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