4 things govt can introduce in Budget that will boost market: Nilesh Shah

"We are a net exporter of capital when we desperately need money to make investments in our own country. Now how do we shift people from buying of gold to buying of financial products? We have to make buying financial products as easy as buying of gold. We have to educate people that gold is not the panacea for your savings and investment solutions. There are other options like financial products from mutual funds to insurance companies to bank deposits," says , MD, Kotak AMC.

The 2021 Budget was a growth dominated budget and rerated the market. Is there anything specific which could come in this year’s Budget that could excite the market?
From a market point of view, today our trade, agriculture, private investment and government spending are above pre-pandemic level but the biggest driver for our economic consumption is below pre-pandemic level. Clearly there is a need in the Budget to support consumption, especially at the bottom end of the pyramid. We have seen what wonders MNREGA has created in the rural economy. Can we think of launching an urban MNREGA solution targeted especially towards those at the bottom of the pyramid and who have been impacted adversely by pandemic?

The second thing will be to give tax incentives or some sort of support to the housing sector. Housing employs the maximum number of people. It is the least import dependent and a nudge can create a multiplier effect in the economy. When the Maharashtra government gives stamp duty concession for a while, it really prepones housing purchases and helps liquidate inventories. We can think of a variety of things to support housing in the Budget which will create a multiplier effect and the bottom of the pyramid will get employment.

Nowadays if you do not speak about environmental, social and governance (ESG), then it is difficult to maintain premium valuations. I expect the Budget to stress how India is encouraging ESG across not only its corporate entities but also across the country. We are the only country in the world which has achieved their Paris Score Target of 40% renewable power.

The final thing will be related to Jan Nivesh Yojana – similar to Jan Dhan Yojana. Jan Dhan ensures that crores of Indians who did not have access to the banking system were having bank accounts. Now we need to shift from bank accounts to investment.

To give a small example, Indians have imported in just 21 years of this century, $433 billion of gold. This is by net import after making an assumption about exports of gold jewellery. As this $433 billion has been paid in foreign exchange, it has led to our outflow of savings from India to other countries. This amount is more than what we have received in foreign direct investments (FDI) or foreign portfolio investment (FPI) in the last 21 years.

We are a net exporter of capital when we desperately need money to make investments in our own country. Now how do we shift people from buying of gold to buying of financial products? We have to make buying financial products as easy as buying of gold. We have to educate people that gold is not the panacea for your savings and investment solutions. There are other options like financial products from mutual funds to insurance companies to bank deposits.

If we can create a Budget which is pro-growth and which supports consumption that encourages domestic savings to fund domestic investments and which talks about environmental social and governance initiatives of the government, I have no doubt that we will be able to maintain our premium valuation.