What Market Veterans Made Of India’s Rs 20-Lakh-Crore Covid-19 Relief Package
India’s equity investors will now focus on how the government spends, funds and executes the stimulus, market veterans say.
Prime Minister Narendra Modi’s Rs 20-lakh-crore Covid-19 relief package may be well above the street’s expectations, but the crux remains in the details that are yet to be revealed, according to market veterans.
Equity investors will now focus on how the government spends, funds and executes the stimulus, said Nilesh Shah, Saurabh Mukherjea and Andrew Holland in separate conversations with BloombergQuint.
The total Rs 20-lakh-crore package will include fresh measures and the earlier steps announced by the finance minister and the Reserve Bank of India, Prime Minister Narendra Modi said while addressing the nation Tuesday. It will focus on land, labour, liquidity and laws to revive the Indian economy, which has come to a standstill amid the nationwide coronavirus lockdown.
“We have to adopt unconventional thinking in terms of spending money because unlike the western world, we don’t have the luxury of throwing away money,” said Nilesh Shah, managing director and chief executive officer at Kotak Mahindra Asset Management Company. “For us, we have to optimise every rupee of spending,” he said, suggesting ideas such as gold monetisation.
India can reduce its widening fiscal deficit if “we monetise the gold held by individuals, reduce electronic imports and use goods manufactured by ‘swadesi’ companies instead of Chinese companies”, he said, reflecting prime minister’s ‘Vocal for Local’ initiative. Also, reduction of educational and tourism spend on foreign economies will keep the substantial amount of savings within the country and help boost the economy, he said.
Saurabh Mukherjea, founder of Marcellus Investment Managers, said he was more excited by the mention of land and labour reforms. “More than the size of the economic package, what I think is more interesting is the mention of reforms. Of gold reforms, land reforms, labour reforms, liquidity,” he said. “Perhaps free land or subsidised land will be on offer and that might be the most potent stimulus here.”
Mukherjea said despite popular belief of doom, the combination of cheap oil, cheap money and a diminished China opens up doors for India. He expects the package will be allied to the opportunities of increasing manufacturing in India.
According to Andrew Holland, chief executive officer of Avendus Cap Alternate Strategies, if the government can pull that off, “it will really auger well for the longer term growth prospects for India and that’s something markets and foreign investors would like”.
If India manages to attract foreign direct investment, it will not only bring in money but also create jobs, something the government has been trying to do for a while, Holland said. “This (the package) will tide us through a working capital problem but let’s see what other measures they have in terms of reforms.”