Budget 2020: What ICICI Prudential AMC’s S Naren Made Of Nirmala Sitharaman’s Proposals
India’s second-largest asset manager said the fiscal slippage in the ongoing financial year was “reasonable”. But any significant breach in fiscal deficit target might lead to a macroeconomic crisis.
“An increase in fiscal deficit has never come without a crisis in the history of India,” said S Naren, director and chief investment officer at ICICI Prudential Mutual Fund, which manages Rs 3.61 lakh crore in assets. “The government is clear that they can afford lower growth but not a macroeconomic crisis.” According to Naren, while equity investors were “very comfortable” even if the fiscal deficit went up by 1-2 percent to kick start growth, the debt side of the asset management company “weren’t happy” with it.
India’s fiscal deficit settled at 3.8 percent in 2019-20 from an estimated 3.3 percent after invoking the “escape clause” under the Fiscal Responsibility and Budget Management Act. The government also pegged the fiscal target at 3.5 percent for the fiscal year ending March 2021.
The current government, Naren said, has been “very disciplined” on parameters such as fiscal deficit, current account deficit and inflation in the last six years, barring the temporary spikes in food prices. “The thought process of this government is that growth will come back if you keep these three parameters [in check].”
Meanwhile, Naren said there was enough money in the country to be invested in products other than tax-savings instruments. “The biggest selling product for almost all asset management companies is not equity-linked saving scheme products,” he said.
Besides, he said the room for growth in debt mutual funds is huge. He, however, sees some short-term volatility in the market due to Coronavirus.
Watch | Why ICICI Prudential Mutual Fund’s Naren Likes 2020 Budget