The key thing the government can do via the union budget would be to spur demand because we have a problem of consumption, said Rashesh Shah, chairman and CEO of Edelweiss Financial Services, adding that consumption has been the key engine and the budget could be the time government could relax the fiscal deficit target, spend a little bit more, maybe cut taxes for the common man and spur consumption and demand.

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"The government has done quite a bit in the last few months including corporate tax, announcing a lot of schemes for liquidity, for non-banking financial companies (NBFCs), for real estate sector. The last thing that is required is for the consumption to be spurred,” said Shah from the sidelines of the Edelweiss Credit Conclave. “Now consumption is at the center-stage and if we can get that going, investment will pick up after a few quarters,” he added.

“My expectation would be that government does expand on the disinvestment programme and raise a lot of revenue through asset sales. Government, on one side should relax taxes and spur consumption and on the other side, try and sell assets to raise revenues for fresh investments into infrastructure. This should be the two-pronged approach for the annual budget. I hope they follow-through on this,” said Shah in an interview with CNBC-TV18.

When asked about his expectations from the Reserve Bank of India’s (RBI) in terms of rates cuts, he said, “We were all hoping that central bank will cut rates in February again to bring down the cost of capital but given the oil price uncertainty, it may not cut, and that could be a little bit of dampener from a liquidity and cost of credit point of view.”

On NBFCs, he said “The last year was a crunch year for them. Especially, the July-September quarter, which was the hardest one because there was a lot of liquidity freezing that happened. However, in the last quarter that is October-December, things have significantly improved. We have seen a lot of NBFCs raise liquidity via bond issues. Even the bank credit has started flowing again."

In the last week of the year, the government cleared the final clarifications on the partial credit enhancement schemes (PCGS), he said, adding that this quarter they expect about Rs 30,000-35,000 crore to flow from banks to NBFCS via the PCGS.

“So, hopefully by end of March we will see a lot of liquidity coming into the system and also into NBFCs. Last year was a very difficult year but the last quarter, the greenshoots have started coming through and NBFC liquidity clearly has improved in the last three-four months," he said.

According to him, liquidity is still not enough for growth to come back in a significant way for NBFCs, and so FY21 would still be a year of consolidation for NBFCs. "NBFCs will still be very calibrated in growth and maybe after that growth will come back. One more year of stabilisation but not distress anymore is what I expect going forward,” he said.

First Published:Jan 8, 2020 10:39 AM IST