Focus on job creation and investment-driven growth should be a primary agenda in this budget 2023

• Focus on job creation and investment-driven growth should be a primary agenda in this budget. Infrastructure projects hold the key to the development of any country.
  
• Tightening of the monetary policy and consecutive rate hikes by the RBI as inflation crept impacted the purchasing power capacity of a large section of the populace, especially in the rural sector.
  
• In this economic climate, where credit availability is facing global headwinds, the government can offer support via credit stimulus to small and medium enterprises.

The Union Budget is one of the most anticipated events, closely watched by market participants. By offering a blueprint for the economic roadmap of the union government, the budget often serves as a catalyst that stimulates overall economic and market growth. As the world battles economic headwinds and recessionary trends, all eyes are on the FM and what she will present on February 1.

Being the last full-year budget before the Union Elections in 2024, we expect the government to deliver a growth-oriented budget, offering a roadmap to generate gainful employment opportunities without burning a hole in fiscal health.

From a market perspective, any announcement or policy draft to bring the oil and gas sector under GST would be positive. The market will also react favorably to any plan to reduce pending receivables of infrastructure companies from government undertakings via a quick dispute resolution process. Moreover, new measures to prod state governments to improve the financial health of electricity companies will also be received well by the market.

The markets, however, would be wary of a full-fledged populist budget or a significant increase in subsidies that impact the fiscal consolidation roadmap. These measures can result in a market correction. A substantial rise in borrowings that can increase long-term bond yields could make markets jittery.

We believe that in this budget, the government will remain committed to maintaining macroeconomic stability by adopting a fiscal consolidation path. The government is dealing with slowing global growth and macroeconomic uncertainties threatening domestic growth. Against this backdrop, achieving the right balance between growth and inflation, with a focus on capacity building, is crucial.

A push to job creation and infra growth

Focus on job creation and investment-driven growth should be a primary agenda in this budget. Infrastructure projects hold the key to the development of any country. An emphasis on infrastructure spending and increasing budgetary allocation to infra projects in the upcoming fiscal will be helpful in the push for growth. Steps towards infrastructure development will augment our job creation capabilities as well. Additional focus on building and improving public infrastructure such as water, metro, railways, defence, digital infrastructure, and green initiatives is the need of the hour. It will showcase our true potential as an investment destination, ensure easy and fast movement of goods and services, and help in employment generation.

We hope that the upcoming budget takes steps to provide a fresh impetus to private capital expenditure that has been sluggish in the past few years. It will boost investment activities leading to more production and employment.

The PLI scheme that offers production-linked incentives to multiple sectors and industries to manufacture domestically has been a huge success. We hope the government takes steps to include more industries and sectors under the PLI ambit. This move will boost manufacturing in India and help drive growth and employment opportunities.

Higher rural spending to beat inflation pressures

Inflation has been relatively high in the last fiscal, driven by global cues. A tightening of the monetary policy and consecutive rate hikes by the RBI as inflation crept has impacted the purchasing power capacity of a large section of the populace, especially in the rural sector. We hope the government offers relief measures for those at the bottom of the pyramid.

As the rural economy recovers slowly from the pandemic, more policy measures aimed at offering affordable housing options and expanding the scope of employment guarantee schemes will be helpful. Employment and housing are two core areas where government policy in the budget could bring about lasting change. The Economic advisory council to the Prime Minister has spoken about universal basic income and higher fund allocation for the social sector to reduce inequality. More steps in this direction will help augment rural growth and put the country on the path to prosperity and growth.

The government can also offer relief by expanding the current income tax benefits for housing to support growth and affordability in rural areas.

Small and Medium enterprises

The Indian economy has come out of the pandemic-induced slump and is a shining light, even as global economic growth stalls. In this economic climate, where credit availability is facing global headwinds, the government can offer support via credit stimulus to small and medium enterprises. The banking system is on the cusp of a good recovery with robust balance sheets, improving asset quality trends, and lower provisioning. A stimulus will help credit growth pick up steam.

We hope the budget sets a roadmap to build and bolster the entrepreneurship culture in India with new policies and a push for fresh investments in agriculture and allied activities that can be a focus area. The budget should also focus on developing rural industries and improving the reach of healthcare facilities in rural areas.

In a nutshell, the budget must focus on driving and sustaining growth via capacity creation. The government must take steps to build on its capital expenditure by fostering private capital expenditure. Making the atmosphere more conducive for capital market investments will help fulfil the dream of making the 20s truly The Indian Decade.

(B Gopkumar is MD & CEO, Axis Securities)