What is needed for the Indian economy is broader policy initiatives to drive growth and Finance Minister Nirmala Sitharaman is very constrained in what she can do in the Budget, says emerging markets equity strategist Adrian Mowat.
“The fiscal deficit forecast is around 5.8 percent. If you look at Article 4 of the IMF which looks at off-balance sheet items, augmented fiscal deficit is estimated at somewhere closer to 10 percent of GDP. Revenue is less. So we have a situation where the Finance Minister is very constrained,” he observed.
According to Mowat, the most important issue for the Indian economy has been fixed income capital formation in the private sector. The factors that are driving may not be factors driven by budgetary announcements but more to do with confidence in the private corporate sector.
“To some extent what I rather see is a disappointing budget in terms of growth emphasis and more of a budget focusing on fiscal consolidation, which to me would make awful lot of sense at this point. The current government has a strong mandate coming out of general election and they can afford to run more austere fiscal policy in order to improve the fiscal deficit and then become a bit easier on fiscal discipline as you get closer to next general election, which is many years away,” he further added.
When asked how to position in Indian market, he said it continued to be the same old story, which was buy high quality names. "Buy the private sector banks that are delivering and you have to be selective there as well as opposed to buying the broader market,” Mowat added.