economy now in full swing after about two-and-a-half years of
lockdowns and restrictions, all eyes are on the forthcoming General
Budget for direction and the way forward in terms of fiscal policy.
prices have cooled down somewhat, there
is still anxiety as to how the government plans to tackle inflationary trends,
its measures to spur capital expenditure and bring back growth and jobs. There
is the added dimension of next year being an election year and temptation to
lean towards populism.
Venkataraman, Chairman, IIFL Securities said that he expects the
government to be fiscally conservative.
said in an interview with businessline:
What are your broad expectations from the Budget?
We think that the government will continue to be
fiscally conservative. It will attempt some populist measures, but food subsidy
being cut gives it the room to do this up to ₹1 trillion. There is a risk of
customs duties being raised on selective items as this government has been
inclined to be protectionist in its pursuit of domestic manufacturing. We
expect continued thrust on capex, focused on infrastructure build-out as
construction pulls labour in from rural areas and this can prevent a recurrence
of rural distress in the lead-up to the elections.
What are the factors that will have a major impact
on markets this year?
China reopening, the US
over-tightening, Russia-Ukraine crisis resolving are three major events.
China reopening could be inflationary (more demand
for commodities) as well as disinflationary (supply chains healing), so it is
difficult to say which one will prevail.
The US over-tightening in order to snuff out
inflation decisively is a possibility, since it is difficult to engineer a soft
landing and inflation scare has begun to dominate the US Fed speak
Finally, Russia-Ukraine crisis, if it resolves will
create a happier supply situation, but the likelihood is low. The dollar may
continue to depreciate and China reopening could give emerging markets a