Fiscal consolidation is in the right direction, says Credit Suisse
While there are still challenges to be addressed, Mishra is optimistic about India's economic future and sees strong earnings as a key driver for the market.
Federal Reserve chairman Jerome Powell and his colleagues lifted the Fed’s target for its benchmark rate by a quarter percentage point to a range of 4.5 percent to 4.75 percent. The small move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that.
Finance Minister Nirmala Sitharaman announced the 2023-24 Budget in Parliament on February 1, 2023. While presenting the Union Budget in Lok Sabha, FM said the Indian economy is on a "right track and heading towards a bright future".
The risk in the global markets and the Union Budget 2023 are the two big themes Neelkanth Mishra, Managing Director, India Strategist and Co-Head of Equity Strategy, Asia Pacific at Credit Suisse and Vetri Subramaniam, Chief Investment Officer at UTI AMC discussed in an interview with CNBC-TV18.
Mishra highlighted the importance of the fiscal consolidation that the Indian government is currently attempting, stating that it is ‘in the right direction’. Despite this positive step, he noted that the country still faces a large deficit in payments.
“I think the fiscal consolidation that the government is attempting is in the right direction. It is also at the right pace,” Mishra said, warning that if you consolidate too fast, you slow down the economy, and then you get into "a very dangerous debt spiral".
Despite the current challenges, Mishra is optimistic about the future of India's economy. He predicts that over the next 5 years, the government's footprint in the economy will slowly fade away. This will be supported by strong earnings, which Mishra believes will continue to drive the market forward.
However, there are also risks on the horizon. Mishra noted the possibility of downgrades in the metals and IT sectors, which could have negative consequences for the market.
One of the big themes of Budget 2023 was the huge capex number. FM has increased the country's total capital investment outlay by 33 percent from last year to Rs 10 lakh crore. The allocation amounts to 3 percent of the country's GDP. With this allocation, the effective capital expenditure will be Rs 13.7 lakh crore or 4.5 percent of the GDP.
“The 33 percent is a number which needs to be adjusted,” Vetri Subramaniam said.
For the entire discussion, watch the accompanying video
(Edited by : Pradeep John)
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