Deepak Lalwani: India Report
Comment of the Day

March 03 2015

Commentary by David Fuller

Deepak Lalwani: India Report

My thanks to the author for his informative report on India’s Annual Budget (Y/E 31.3.2016).  Here is his Budget Analysis:

VERY POSITIVE, BALANCED, PRAGMATIC BUDGET AIMED AT GROWTH, JOBS, INFRASTRUCTURE AND ADDRESSING NEEDS FROM ACROSS SOCIETY. DESPITE NO "BIG BANG" REFORMS, INDIA INC IS LARGELY HAPPY AS THIS BUDGET IS SEEN AS THE START OF AN UPWARD ECONOMIC JOURNEY

1. Positives include: a) A social security net has been started; b) Intent to reduce the fiscal deficit, with an eye on fiscal prudence while spurring economic growth; c) GST expected to be introduced on 1 April 2016; d) Infrastructure spending to continue to support economic growth; e) Forecast tax collection targets are reasonable and should remove the need on tax officials to be over-zealous and reduce pressure on them to harass taxpayers; f) GAAR postponed.

2. Negatives include: a) Rather rosy assumptions made of growth - calculations could go awry especially if oil prices spike sharply higher; b) No details are given on what will drive growth to such levels; c) Very ambitious target for privatisations.

Overall, a very good budget. The key, as always in India, lies in implementation and speed of delivery.

David Fuller's view

The India Report also contains a 10-point assessment of the Budget which is sensibly pro-growth, as one would expect from Narendra Modi and Finance Minister Arun Jaitley. 

Here is the India Report.

The possibility of oil prices spiking sharply higher, mentioned by Deepak Lalwani, is low in my opinion due to oversupply and moderate demand.  The greater risk, I maintain, is another weak monsoon as this is in the hands of weather gods.  However, given a good monsoon inflation will be lower, increasing prospects for further interest rate cuts.  This would help India to achieve its GDP growth projections.   

The stock market is steady with a new closing high by the Nifty 50 Index.  A downward dynamic near the psychological 9000 level would be required to delay higher levels beyond the short term.  I participate in India via the JPMorgan Indian Investment Trust (JII LN Equity) which trades at a discount to NAV of -12.48%, according to Bloomberg.  Another very good UK-listed vehicle is New India Investment Trust (NII LN Equity), trading at a discount to NAV of -6.12%, managed by Aberdeen Asset Management.

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