I think the Budget is ambitious and provides a vision for a new India, which is very important. There is so much if dissidence and pessimism around. So to that extent, the confidence Finance Minister Sitaraman is a sentiment booster. There is an overarching aspect over every sector – be it infrastructure, social reforms, financial sector, corporates etc. The long-term growth momentum issues seem to have been addressed. Simple, yet important issues like the Model Tenancy Law have been tackled. There are a lot of dwellings that are still under lock-and-key in the absence of a proper Model Tenancy Law. So, there has been a focus on maximising the use of the assets available.
That said, the government must realise the importance of a vibrant bond market in India. Here, I am slightly disappointed. The long-term bond market needs to be activated by the same methods that the National Stock Exchange (NSE) used when they started the futures & options (F&O) segment. They actually pushed the case for having a good F&O market. Once the volumes are created, it will solve a number of issues for times to come. Players need to be incentivised to start trading in such markets.
The focus in infrastructure is a positive step and that’s what the markets, too, were expecting. However, infrastructure financing is a long duration game and for that, a healthy bond market is essential for players to raise money. The problem with the financial market right now is all due to the asset-liability mismatch (ALM).
That said, we also need credible agencies to rate these long-term bonds / papers. In developed markets (DMs), there are government-backed institutions that help in such processes. While a vibrant bond market is important, there have to be high-rated bonds as well that are backed by solid rating for investors to buy into.
In Union Budget, finance minister has asked SEBI to consider to reduce maximum promoter shareholding from current level of 75% to 65%. Meaning thereby, minimum public shareholding for listed companies has to be increased from current level of 25% to 35%. This should be done over a period of time. That is, companies should be allowed to comply with this over the next four – five years. There will be huge stock / paper that will come to the market and there should be enough appetite to absorb it.
There has been a lot of emphasis given to small companies and start-ups. These are segments that will take India forward. The way in which the government can revive economy and push investment is through tax incentives. For now, the government has done what it could.
So, the three key takeaways for me from the entire speech / proposals are the thrust on infrastructure, de-clogging NBFCs and incentivising small-scale industries. This includes benefits extended to MSMEs, affordable housing etc.
U R Bhat is managing director at Dalton Capital. Views expressed are his own
As told to Puneet Wadhwa