Hype, Hope and Reality
Aspiring to find a socially impactful side to Budget 2014-15, the United Way of Chennai – a part of the United Way World Group – hosted its 2015 edition of ‘Budget and Markets – Hype, Hope and Reality’. The participants included renown Indian economists, market experts and high ranking officials of some of the top organisations in India.
Igniting an intellectual mood at the event was leading economist, C. Rangarajan, who shared his insights about the current structure of the Indian economy. “Initially, we all thought that 2013-14 was a year when the economy grew at less than 5%. We now know that the economy grew at 6.5% and for the current year, it is estimated to grow at 7.5%,” he elucidated. Explaining further, he said, “A combination of the rate of investment and the productivity of capital determines the rate at which the economy grows.”
To dissect the budget from a social point of view and address key social issues, intellectual experts and financiers from different organisations presented their views at a panel discussion during the event. The panel featured Ramesh Damani, member Bombay Stock Exchange, as the anchor, Nilesh Shah, Managing Director, Kotak Asset Management and Milind Barve, Managing Director, HDFC Asset Management. On the issue of whether the budget was ‘bold’ but not ‘brave’, Nilesh Shah opined that it was in fact a very bold budget and it will be appreciated as time goes by. He pointed out that it was the first budget in which revenues were underestimated and expenditures were fully provided for. Another facet that he highlighted was the fact that the government has accepted ideas from industry captains. Some of these included allowing offshore fund managers to manage their funds from within India, creating of differential voting shares/non-voting shares to support stronger capitalisation of PSUs, the gold lending and gold bond scheme to keep capital within the country, etc.
Big Bang reform:
S Ramesh Damani introduced the issue of Big Bang reforms, stating that perhaps what the market wanted from the budget was to see labour reforms in the form of the right to hire and fire, disinvestment in PSUs, further opening up of
Budget and Markets Hype, Hope and Reality
FDI in various sectors, etc. Milind Barve started out clarifying that he was never in the camp that expected Big Bang policy statements. He was, however, very happy to see that the budget was directionally correct. Further, there was conservatism in the numbers, which therefore looked achievable. He moved on from the topic suggesting that a lot would depend on policy execution which unfolds in the year ahead. To be fair, judgements about this budget can be passed only once the revised estimates are available in the next one.
S To elicit the participants’ views on which budget was their favourite, Ramesh Damani narrated how Manmohan Singh’s 1991 budget was considered as a benchmark budget, P. Chidambaram’s 1996 budget as a dream budget and Yashwant Sinha’s budget as a watershed budget. Picking up the thread, Nilesh Shah shared that in his opinion, the 1996 budget, which was announced against the backdrop of the Asian crisis, was truly a bold budget and it ensured that Indian industry is where it is today. Milind Barve, on the other hand, pinpointed the 1991 budget as the announcement that made the event so important, perhaps because it was presented when India was on the cusp of a serious crisis. It created a concomitant response and it more than delivered.
Then again, he clarified that a budget merely sets the tone for growth and should be seen in the right perspective.
S Nilesh Shah offered an opinion that the construction sector, although small and largely unorganised, could turn out to be a winner. With a growth in the volume of projects, less competition within the sector as debt-ridden companies file for bankruptcy and reasonably low valuations, the construction sector could give the markets a good surprise. Milind Barve suggested that equity as an asset class stands out as a distinct winner over the long run while debt, in the form of long duration products, too could deliver good gains due to the unfolding falling interest rate scenario.
Bull market caption:
Finally, when asked to caption the current bull market, Nilesh Shah called it the ‘Bull Market of India’ wherein the rising tide makes every sector and every company grow. Milind Barve summed it up as the ‘Bull Market of the New Government’, explaining that since 15th May 2014, people have not been uncertain about the equity markets anymore, responding to the real hope that the new government comprises of a group of people who can deliver.