New Delhi: Be bold, don’t impose taxes and increase spending — this is what market guru and ace investor Rakesh Jhunjhunwala suggested to Finance Minister Nirmala Sitharaman, ahead of the Union budget 2021-22 to be presented on 1 February.
In an Off the Cuff conversation with ThePrint Editor-in-Chief Shekhar Gupta Wednesday, Jhunjhunwala said the government should wait for the growth to come back before thinking of taxes.
“Be bold, don’t impose taxes. Let growth come and then you can think of taxes,” he said. “In the budget, I expect that there will be no taxes, a substantial increase in expenditure and a 6.5 to 7 per cent fiscal deficit,” he said.
The budget for 2021-22 is keenly awaited and comes at a time when the economy, ravaged by the pandemic, will require a substantial boost in the budget through higher spending and steps to increase consumption demand in the economy.
Jhunjhunwala expects the Indian economy to contract by 7 per cent this fiscal and rebound to grow at 10 per cent in 2021-22, then falling again to 6 per cent in 2022-23, before gradually rising to hit double digit growth rates.
“I think we’ll grow -7 per cent this year… next year we’ll grow at 10 per cent and within three-four years, I see double digit growth for India,” he said.
Jhunjhunwala was also bullish on the Indian stock markets. “The greatest bull market India will ever see is ahead of us, not behind us,” he said, adding it is not the time to withdraw from the markets, rather the time to invest.
The BSE Sensex has been on a bull run crossing the 50,000 mark for the first time Thursday.
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On markets’ seemingly unnatural run
Jhunjhunwala also addressed an anomaly asked by many — why markets are on the rise even when the economy is contracting.
“If the market was to act exactly as per economic indicators, economists would have been the richest. And if I had listened to the economists, I would’ve been a poor man today,” he said.
Markets are a predicting mechanism. They look at the future and don’t look at the present or the past, he added.
He said the bullishness in the market has been aided by liberal fiscal and monetary policies worldwide. “But I think there is far more to the rise in the markets than just liberal fiscal and monetary policies,” he said, adding that all change and the policies that have come into effect since 2014 will come together.
“People don’t understand Jan Dhan, they don’t understand Aadhaar… The change that has taken through RERA, insolvency Act, disposing subsidies and the way the government is trying to improve the ease of doing business (sic),” he added.
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‘Biggest opportunity is in PSBs’
Jhunjhunwala was also optimistic about the prospects of state-owned firms, especially the public sector banks.
“There is a lot of opportunity in the public sector and at the moment, the biggest opportunity is in public sector banks. Economy is going to grow. Public sector banks have made more provisions than the ICICI Bank and HDFC Bank. They have provided for the bad debts. They are at the cusp of efficiency,” he said.
“Valuations of the banks are ridiculous. Canara Bank’s loan book is the same size as ICICI Bank. But the valuation of Canara Bank is much lower. Cost to income ratio of Canara Bank is lower,” he said.
Jhunjhunwala also said the government is undertaking reforms in state owned banks. “The government has merged the banks and will sell some of the banks,” he said.
Tips to investors
Jhunjhunwala gave tips to investors, and insights into his style of investing too. Before investing, Jhunjhunwala said, he looks at the opportunity, the competitive ability, scalability, financial profile and valuation of a company.
“The best opportunities are not recognised by most people,” he said, pointing out that optimism is important for any investor.
Jhunjhunwala also said retail investors should look to invest through SIPs or systematic investment plans. The markets are going to rise in the future but it may be difficult to time the markets, and monthly investments through SIPs may be a better option than going in for lump-sum investments, he added.
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Impose income tax on all farmers earning above 10 lakhs per annum.