Budget Reactions: Banking the big winner on infra push: Yes Bank
Rana Kapoor of Yes Bank tells CNBC-TV18 the government has taken some prudent steps towards fiscal consolidation. He says, the finance minister has been very realistic about identifying a 5.1% of the gross domestic product (GDP) for the fiscal year 2013.He also mentions that there is enough revenue measures accompanied by curtailment of exp iture steps being taken. At the same time on the infrastructure side, several of the supply side constraints are being addressed.
Q: A disappointing showing for the Budget, how would you rate it and what was the stand out feature?
A: There are some prudent steps that the government has taken towards fiscal consolidation which is a signal that RBI has been awaiting prior to taking monetary relief actions.
The single biggest game changer in this Budget is really what has been done for the infrastructure sector. The doubling of infrastructure tax free bonds to Rs 60,000 crore from Rs 30,000 crore and across section including Rs 5,000 crore for SMEs through SEBI.
The trem ous pain points that were there in the power sector are being identified and given relief including ECB funding. The lifeline of a billion dollar ECB for the airline sector is definitely a step in the right direction. Final decision on FDI in airlines would have been very helpful.
Viability gap funding for telecom towers as well as for the oil and gas sector is also a step in the right direction. If these come together apart from delisting there will be newer opportunities and far greater viability and credit strength on existing projects as well. So it's good for banking in many respects.
Q: Do you expect the RBI will have any levy to cut rates? Irrespective of the credibility of the fiscal deficit numbers. Will RBI cut rates?
A: The FM has been very realistic about identifying a 5.1 target. There is enough revenue measures accompanies by curtailment of exp iture steps which are being taken. At the same time on the infrastructure side, several of the supply side constraints are being addressed
Q: Why will RBI cut rates in all that?
A: These are like two big signals on fiscal consolidation as well as on the supply side factors being addressed and RBI has been looking at those signals through the Budget which has been somewhat protracted.
I think it's come out fairly loud and clear in the message today from the FM that there will be no further fiscal compromise and supply side issues through investment particularly in infrastructure is going to be emphasized.
RBIs interpretation of these steps and both short and medium should result in at least some rethinking on what should be the repo policy rate regime going forward. I expect some form of reversal taking place in the April credit policy.
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