FM delivers a moving Budget – Umesh Revankar
We believe the FM has presented an investment-led Budget.
By Umesh Revankar
The Union Budget 2022 is a bold and growth oriented budget which will result into a multiplier effect on the economy and benefit the aam aadmi, despite no direct benefit transfers. In India, the capital expenditure multiplier is 2.5x, and it has the maximum multiplier effect, something the Indian economy is in desperate need of, post the dust settling on the pandemic hit economy.
We believe the FM has presented an investment-led Budget and this will propel sectors like cement, steel and construction and building materials which will lead to increased movement of goods. The emphasis on the ‘Gati Shakti’ plan, which is aimed at easing movement of people and goods will give a boost to transportation industry.
Economic Zones like textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial corridors, fishing clusters, agri zones will be covered under the scheme to improve connectivity & make Indian businesses more competitive. Thus the overall sluggishness in infra will be driven by infra spending, which will in turn push bulk transportation movement and help in the revival of the transport industry.
The medium and heavy commercial vehicle (M&HCV) truck segment, has witnessed demand contraction over the past two years, and will thus get support from the increased allocation towards the infrastructure sector.
The government widening the Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 50,000 crore to Rs 5 lakh crore and extending the cover to the next fiscal and the revamping of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) are steps taken to accelerate growth and reduce stress particularly in the MSME segment. The schemes have helped small businesses to tide over any liquidity crunch faced in the wake of the intermittent lockdowns. Such fully guaranteed schemes by the government encourage lending to SMEs.
Housing project allocation of Rs 48,000 crore, 80 lakh homes under PMAY and measures to ease the processing is likely to boost growth momentum for affordable housing and in turn give a fillip to the building materials sectors and real estate activities in general. Building material supporting segments will rebound—from paint to cement to pipes to steel to construction. India’s process of urbanisation is just starting to take off and policies for urban planning will support the economy.
The plans to further the push for EV penetration in public transport and create special mobility zones for EVs, should also spur EV demand. We believe the budget is a very forward looking one with emphasis on digital economy and reducing carbon footprint, which will benefit digital lending and lead to environment friendly policies going ahead for the vehicle sector. The ease of doing business which the government has been making strides towards is finally taking centre-stage as the government seems to have committed to a long term growth of over 8% for the next 3 years. India economy is now well placed and we are optimistic on credit uptake in the economy.
It has been a tough balancing act and the government refrained from populist measures and kept things real. The fiscal deficit targets look conservative, with higher tax collections in sight and factoring a rebound in public-private spending. All the fiscal levers have been pushed by the FM Nirmala Sitharaman with three strong drivers in sight — capex with a strong multiplier, technology boost and contact sectors to normalise.
The author is VC and MD, Shriram Transport Finance