Shyam Srinivasan, MD & CEO, Federal Bank, says “the commitment and the consolidation focus around the fisc was clear. And if somebody had not followed India for a long period of time, and only heard the first 10-15 minutes of the speech of the finance minister, it was oozing with confidence. Every success story of the last few years and the developments made were visible. So I would say the budget would be characterised through these three Cs. In addition, it was crisp also. But these three Cs characterise the budget.”
The entire financial space, the banking sector is quite happy. The bond yields have fallen very smartly looking at the fiscal deficit number. What are your early readings of the speech this time round as far as the finance minister’s speech is concerned?
Shyam Srinivasan: There is always a temptation to try and rate every budget. I am not going to go in that direction. But let me say the finance minister spoke of three Ds, the trinity of diversity, democracy and demography. I will try and characterise it with three Cs. I think it reflected commitment, consolidation and confidence. So from my point of view, the takeaway was the three Cs. It stuck and the commitment to honour many of the numbers that were pointed out in the budget last year have come through or the glide path is clear.
Consolidation is very clear, you also pointed out. I think the commitment and the consolidation focus around the fisc was clear. And if somebody had not followed India for a long period of time, and only heard the first 10-15 minutes of the speech of the finance minister, it was oozing with confidence. Every success story of the last few years and the developments made were visible. So I would say the budget would be characterised through these three Cs. In addition, it was crisp also. But these three Cs characterise the budget.
What are your thoughts on the hint towards the next generation of reforms? Clearly, corporate India, the institutional investors we speak to almost on a daily basis for the nine years have been applauding that a large part of the rally in the stock market has got to do with the confidence the government has given out in terms of reforms. What are your thoughts? In which direction do you think they will press upon further? Shyam Srinivasan: I think it was clear from the speech and more importantly, the speech was less than 60 minutes, which we have not seen for many years. It has been fairly all around right, whether it is in the area of those four alphabets of Gyan and or the geographies that are imperative in terms of carrying large parts of India which are performing below the average and have been relatively less developed, whether it is the northeast parts of the north itself, which have not stepped up. I think it is going to be fairly broad-based but the emphasis is clearly on creating an environment where ease of doing business should get easier or less cumbersome and thereby unlock innovation. The Rs 1 lakh crore (Rs 1 trillion) that has been set aside for spurring investment into innovation itself is an indication of the kind of things that are going to happen or the money that has been set aside for the ESG-sensitive areas like rooftop solar, or stuff that have been focused around the infra-development all indicate it is going to be quite all around.
And the job, I am hoping those famous lines of less involvement of government but more not to come in the way of business are beginning to come true. So I would think if these statements are honoured, which looks possible and that is why I said commitment and consolidation is visible, you should be able to see in the periods ahead a lot of private capex coming in and stepping in and developing on this platform. The digital public infrastructure is a story.
What is happening on Gift IFSC is a story. All these set the tone for a considerable amount of investments flowing in the periods ahead.
I will talk about something which in a senseis the wow factor for us in the Budget. The temptation to stroke the rural economy is the need of the hour. The government had the bandwidth and the ability to perhaps come out with a large popular scheme. But they have not done that. Isn’t that a sign of maturity and confidence that a) they are confident of the mood of India. B) Also they understand that the economy is moving.
Shyam Srinivasan: I did mention at the opening part about the three Cs – confidence, commitment and consolidation. When you look through the lens of has it been populist or have you done something specific for rural to stroke rural, you may not directly see it. But the high point of the budget is that a lot of nuanced stuff has happened and it is not screaming headlines.
You should look this both as direction and more importantly, the stuff that is being done, is not very near term in nature. They are creating the infrastructure. And once you create infrastructure, all of us know that it is the essence of any good budget. Create the capability for people to succeed, create the environment for people to succeed, create the capability for money to flow in. And I do think from that lens, whether it is rural and or specific geography, specific segment, there are enough enablers and we must see this as a continuum.
I am hoping that when the full budget comes up in June-July, whenever you will see many more which starts building on this.
I would also like to draw your attention to specifically the fiscal deficit number which is much better than what all of us anticipated. Do you think this budget in a sense, gives a very strong hint towards why the cost of capital in India should come down structurally? Is that something which we can see that a bond market budget?
Shyam Srinivasan: Very true. I would not characterise it as a bond market budget, but certainly direction is clear. In many conversations we have all seen right, the development to development, really the direction that the country is going. Evidently, you have to start mimicking many international geographies in terms of a developed market in terms of how capital is and the cost of capital.
Through all these initiatives, I can see that our market will mirror or even be ahead of some of these advanced markets or developed markets where access to capital, availability of capital, cost of capital, all will be a lot easier and lower. That means business models of particularly financial institutions and banks will start changing. I think we are at that cusp where the transition is evident. It also gives RBI, the regulators, a scope to revisit rate decisions. So it is a good outcome directionally.
What is the missing link in this budget? I never thought that as a market commentator, I would struggle to find difficult questions because you always have something to criticise when it comes to Budget. But this time I am running out of ideas. So, I am going to throw it to you.
Shyam Srinivasan: There is always a long wish list. If you want a 10 on 10 budget, you will always have some wish list through which lens you look at it. You pointed out something around the rural. I heard somebody else point out saying that there is not enough done for the salaried. So, there will always be something.
But we have to recognise that it is a tradeoff. You have to find out within the architecture of what you want to create if the best is possible. The big message in this is fiscal consolidation, honouring the commitment to bring it down to 4.5% with the glide path. That is a good outcome as it signals many good things. Continuing to spur capex, be it public or private. If you see the capex between two budget cycles, it looks like only 10-11%. But if you look at a four-five-year continuum, it is a CAGR of 20% plus which is a good thing. That means the base has been created. We do not have to struggle hard to find out what is negative. We can live with all the good stuff and keep building on it.
There was an explicit mention of tourism and if the religious tourism/the Ayodhya experiences anything to go by, that is something which I guess nobody envisaged three years ago, that tourism can be such a big needle moving effect. Given that the finance minister has already mentioned it in this budget, more and more things would be coming out?
Shyam Srinivasan: I totally agree. I have driven on many of the highways, either me or members of the family, and we have come away incredibly impressed with the kind of roadways development that has happened. In all these things, commute is one, the comfort in terms of stay and where people take breaks and in the Swachh Bharat equivalent, if those really gather momentum and we honour it, I do not believe we need another geography for tourism.
India is the place. And like you pointed out, there was a report by one of the fairly known houses on religious tourism-led economic growth. It is quite compelling and does not look like an unreal activity. If you have the Tirupatis and the Varanasis and the Ayodhyas and a few more all done up well and attractive, that can draw a lot of tourists. One can quite believe that this is now going to catch fire and probably stoked well will be very productive for the country. Hotels, tourism, roads, you name it, all of that will come into play.
If 2020, the need of the hour was survival. We were coming from COVID. 2021 was revival, bring in the capital expenditure, start spending, that is what revived the economy. 2023 to some extent, it was really about stability. Do you think 2024 and beyond it should just be about maintaining status quo and things will move like a charm?
Shyam Srinivasan: No, I am repeating myself in another conversation with you. I spoke about survival, revival and then I used a new word, if at all such a word exists, thrival. I think we are at that phase. I do not think it is just the status quo. Status quo is like bare minimum. I do believe many reasons why India should look at things both optimistically and with confidence and continue to keep the good work going.
I am convinced, be it tourism, be it startup innovation, be it the digital public infrastructure, be it the relatively high quality cross-border capability that most businesses are building, this can be quite special. And if China plus one truly starts taking shape, money will flow in and India will be well on course too.
By the way, I have been told that the profit expectations for next year could be about Rs 4,000 crore, that will take you to the elite club, only 50 companies in India have that kind of a profit growth scope. Is that correct?
Shyam Srinivasan: Yes, I also picked up the number. There are not many companies which have Rs 4000 crore plus profit. But allow me the luxury of delivering it before I speak about it. But, yes, we are pursuing that.