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“In our base case, we do not expect any changes in tax policy for markets though any simplification, different from higher taxes, will be welcomed by markets,” says Amit Goel , co-founder and chief global strategist at Pace 360. In an interview with ETMarkets, Goel said: “For middle class, we are unlikely to see any structural change though we may see simplified tax administration proposals,” Edited excerpts: Thanks for taking the time out. The month of January started on a roller coaster note ahead of the big domestic event – Union Budget 2025.
Do you see some recovery in markets post the event? Yes, while the markets are currently reeling from heightened volatility and are down over 10% from their highs, Budget 2025 has the potential to act as a catalyst for recovery. Historically, markets respond positively to forward-looking budgets that focus on structural reforms, robust capex plans, and policies aimed at stimulating growth. Stock Trading Maximise Returns by Investing in the Right Companies By - The Economic Times, Get Certified By India's Top Business News Brand View Program Stock Trading Market 104: Options Trading: Kickstart Your F&O Adventure By - Saketh R, Founder- QuickAlpha, Full Time Options Trader View Program Stock Trading Technical Analysis for Everyone - Technical Analysis Course By - Abhijit Paul, Technical Research Head, Fund Manager- ICICI Securities View Program Stock Trading Stock Markets Made Easy By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading Renko Chart Patterns Made Easy By - Kaushik Akiwatkar, Derivative Trader and Investor View Program Stock Trading Market 101: An Insight into Trendlines and Momentum By - Rohit Srivastava, Founder- Indiacharts.
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Furthermore, clarity on fiscal deficit targets and policies encouraging foreign investments could provide much-needed stability and improve market sentiment. The Indian equity markets are likely to see a strong recovery post-Budget, supported by stabilizing domestic macroeconomic factors and now increasingly favorable global trends. Historical data indicates that similar corrections in Emerging Markets (excluding China) as we have seen in the last few months are often followed by significant rallies, with India leading the charge due to its robust fundamentals.
We expect the Nifty to deliver returns of 7-8% in the next one to three months, driven by improving corporate earnings and resilient high-frequency indicators. Additionally, the government’s expected pro-growth Budget initiatives, such as higher public Capex and measures to support and incentivize the private sector capex, are expected to further strengthen investor confidence. The MSCI India Index could outperform the S&P 500 (SPY) by 8-10% during the same period, positioning India as a standout market in the EM basket.
What are your big expectations from Budget 2025? Budget 2025 is expected to be transformational, focusing on positioning India as a global manufacturing hub while driving inclusive growth. Some major expectations include: 1. Extension of the PLI scheme: Covering high-value sectors such as aeronautics, defense, and advanced manufacturing to attract global players and boost exports.
This would also entail rationalising the import duty and GST structures to support manufacturing of finished products. 2. Increased Infrastructure Capex: Expanding ports, waterways, and logistics networks to strengthen the backbone of India’s economy and enhance global competitiveness.
3. Tax Reforms: Simplifying direct tax structures and offering relief to the middle class to boost disposable incomes and consumption. 4.
FDI Incentives: Policies to attract more foreign investments, especially in technology-driven and high-value industries. 5. Stimulus for Consumption: Addressing rural and urban demand through targeted measures, ensuring that growth is broad-based and inclusive.
What are the key priorities for the government in Budget 2025 to ensure long-term economic growth? The government needs to balance short-term economic recovery with long-term sustainability. Key priorities include: 1. Infrastructure Development: A massive capex push for roads, railways, ports, and urban infrastructure to create jobs, drive industrial growth, and support exports.
2. Tax Simplification: Rationalizing income tax brackets to boost disposable income and also rationalising the import duties and GST structures to incentivize manufacturing of high value-added finished products. 3.
Rural & Urban Consumption: Policies to stimulate rural income through higher MSPs, subsidies, and infrastructure spending while driving urban consumption via tax reliefs. 4. Strengthening Manufacturing: Extending PLI incentives to advanced sectors, reducing import dependency, and improving export competitiveness.
5. Digital Economy & Innovation: Supporting startups and MSMEs through tax breaks and incentivizing digital and green technologies. Any specific sectors that could see increased spending in Budget 2025? The focus sectors for increased spending are likely to include: 1.
Infrastructure: Ports, railways, logistics, and urban development are poised to receive significant budgetary support to drive long-term growth. 2. Defense & Aeronautics: Extending PLI incentives to defense manufacturing and aeronautics can enhance India’s self-reliance in strategic sectors.
3. Healthcare : Improving public health infrastructure to build resilience and meet future challenges. 4.
Renewables & Green Energy: Investments to accelerate India’s energy transition and meet global sustainability goals. 5. Rural Development: Focus on irrigation, rural roads, and housing to uplift the rural economy Do you see any specific measure coming in the Budget to boost consumption, which is showing signs of slowing down? (Focus on govt Capex) Yes, slowing consumption is a critical issue, and the government will likely address this through a multi-pronged approach: ● Higher Capex Allocations: Increased government spending on infrastructure projects will create jobs and put money into people’s hands, boosting demand.
● Middle-Class Tax Relief: Simplified tax structures and increased standard deductions will provide disposable income to middle-class households. ● Rural Focus: Programs to uplift rural income by restarting the rural eco-system, agricultural reforms, higher MSPs, and better job opportunities will ensure that rural consumption is sustained. Such measures would not only directly stimulate consumption but also have a cascading effect on related industries like FMCG , construction, and retail.
Do you see any changes in direct tax structures that middle-class taxpayers expect in Budget 2025? The government is expected to bring relief to the middle class through: ● Increased Standard Deduction: This would improve disposable income for salaried individuals. ● Rationalized Tax Slabs: Adjusting income tax brackets to account for inflation and enhance affordability. ● Tax Benefits for Investments: Greater tax incentives for savings in NPS, insurance, or mutual funds, encouraging financial planning while spurring economic activity.
These reforms would directly impact consumption and align with the government's broader growth agenda. Are there plans to simplify tax provisions for capital market products further, such as long-term capital gains tax or securities transaction tax? It is unlikely that the govt will tinker with the capital gains tax rates. However, revisiting the securities transaction tax could make the Indian capital markets more attractive to domestic and global investors.
These measures would boost participation and improve liquidity. How does the projected fiscal deficit of 4.5% provide the government with the headroom for increased public spending? The 4.
5% fiscal deficit target offers the government flexibility to maintain robust public spending without jeopardizing macroeconomic stability. By reducing the overall subsidy burden, fiscal space can be created for higher infrastructure development, defense modernization, and rural programs. By channeling these resources into productive areas, the government can generate a multiplier effect on GDP growth while maintaining investor confidence.
What role will Budget 2025 play in accelerating India’s journey toward a $5 trillion economy? Budget 2025 will lay the groundwork for achieving the $5 trillion economic milestone with structural reforms and by unleashing key growth enablers. ● Infrastructure: A massive capex push will improve connectivity, reduce costs, and attract investment. ● Manufacturing: Extending the PLI scheme to emerging sectors will catalyze exports and local production.
● Consumption & Demand: Stimulus measures for urban and rural consumption will broaden economic participation. ● Fiscal Discipline: A balanced fiscal deficit target will ensure economic stability while boosting productive investments. By combining structural reforms with strategic spending, Budget 2025 can fast-track India’s economic ambitions without compromising on the fiscal glide path.
Any pre-budget picks for investors? Investors should focus on sectors that stand to benefit from the budget’s focus areas. Infrastructure, logistics, and manufacturing are likely to see significant tailwinds. Companies engaged in defense, aeronautics, and renewable energy under the PLI scheme could also emerge as strong performers.
Additionally, consumer-centric industries tied to rural and middle-class consumption could offer lucrative opportunities in the short-to-medium term. Identifying high-quality stocks with stable earnings and robust balance sheets will be critical in navigating the current volatility. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own.
These do not represent the views of the Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel ).
