Budget 2020 – Key Expectations of Investors from Union Budget 2020 | Inflation | Nirmala SitharamanOn January 25, 2020 by Raul Dinwiddie
The 2020 budget is going to come And retail investors like us must be very interested in knowing What is going to come in this years budget And on that basis we will decide What we have to buy and sell this year And a lot of times you must have seen that the budget comes later And before the budget comes, there is a pre-budget rally Because of which the market goes up and down a lot Because retail investors like us, without thinking or understanding Based on some expectations Start investing And after the budget comes, based on a few small pointers Start buying or selling So I had only one objective for this video That I could tell you what expectations to have of the budget And when the budget comes, on its result You can see your expectations and see whether your expectations were met or not If it didn’t happen then you should decide what you want to do, whether you want to buy or sell I, Jagdeep Singh, welcome you to the Groww channel Let us start today’s video In which we will define what expectations we should have from this years budget And how do those expectations affect us, as investors Before talking about the expectations from the budget, you should know what numbers to look at when the economic survey comes Now you must be thinking what economic survey is Economic survey normally comes one day before the budget Which tells us the objectives that the government set last year What are the numbers they set as a target And to what extent those numbers were achieved this year And if they weren’t achieved, how up and down they went So for that I will tell you those three targets That the government set last year And the numbers about what its expectations are in the coming economic survey The first and most important target That every government sets in every budget, which we call fiscal deficit Fiscal deficit tells us the expenses and the income of the government And how much more the expense was compared to the income, and the percentage of that gap is known as fiscal deficit And every government sets a target for its fiscal deficit in every budget Like if I talk about the previous budget Then the government said that its fiscal deficit target is going to be 3.3% that year But if we talk about some analysts, then from the report of many analysts we find out that There are a lot of chances that our target for the fiscal deficit this year That is going to be overshot And it is being expected that our fiscal deficit this time It is going to be between 3.4 and 3.7 or 3.8% As you know the government makes a lot of expenses that are required to run the country And to meet those expenses the government has to get money from somewhere So that money comes mainly from two places, first, direct taxes Direct taxes, like the income tax we pay to the government And the second is indirect taxes Indirect taxes, like GST And in GST as you know, there are two things, Central GST That the central government collects, and the second is state GST Which is collected by the state government So, if I talk about last year’s budget then the government had given an estimate That this year they are going to collect 11.19 lakh crore from indirect taxes And from this amount 5.26 lakh crore They are going to get from central GST If I talk about this target By November 2019, the government had collected 3.26 lakh crore from central GST So only the coming economic survey will tell us that the remaining money Whether the government will be able to cover in the coming months or not Because whenever the government has a little problem in tax collection So there the chances of the fiscal deficit increasing becomes more As you know that until last year the Indian economy was one of the world’s fastest growing economies If I talk about the numbers now then our economy is increase by almost 4.5-5% But the last budget we got, we were given the target of 7-8% So this also will only be known by the coming budget, that the estimates this year And to complete those estimates, what are the steps is the government planning on taking Now you must be thinking that these few problems that came in the Indian economy, what were the reasons behind this? So, if I talk about the main reason then the main reason was that there was some problem in consumption The rural economy in India contributes a lot of the GDP And if I talk about one year then there was a big drop in the consumption Because of which the monetary policy, now you must be thinking what monetary policy is So monetary policy is in the hands of the RBI which controls the banking sector So RBI continuously cut down the interest rate and tried to increase the consumption Now to bring that rate down a little more will be very difficult for the RBI And whenever the monetary policy completes its work then the entire control goes to the fiscal policy Fiscal policy which is mainly controlled by the government So what is very important in fiscal policy is how is the budget going to come And how will the budget cater to and solve those problems So this was about the economy, in which I told you a little about the targets That what were the targets set by the government last year And according to that how much those targets were achieved And we will find out the exact number when the economic survey comes out Now when we are talking, is complete speculations The exact number, when the economic survey comes out on 31st January, 2020 Then we will exactly find out how much the targets were achieved And how much those targets were overshot Now after all this, let us talk about those three expectations That we retail investors have a lot of from the budget What are those expectations and how much do you think those expectations are going to be met in the coming time? If I talk about the first thing that retail investors like us and taxpayers expect a lot when the budget comes And that expectation is that the income tax will be lowered this time Or it will be reduced in its slab, its slab will be increased a little So that we can pay lesser tax So I will not be able to tell you properly whether this will be reduced or not But we can discuss about two three pointers Through which we can get an idea about what is going to happen Let us talk about the first pointer through which we can get an idea whether the income tax slab will be reduced or not Like I just told you The main problem in the Indian economy was of consumption That there wasn’t a lot of growth in consumption in the Indian economy And whenever the consumption goes down, all the sectors are badly impacted So to increase this consumption First itself the interest rate was reduced in the monetary policy But there wasn’t an impact on consumption So apart from this it is said that whenever the income tax is reduced Then the common people get more money And when common people get more money, they spend more money And when they spend more money, then the company from where they buy things, it gets a boost And the overall economy starts going up, which means that consumption goes up So here I would like to bring a very simple fact Do you think that by reducing income tax, the consumption will increase? So here there is a small misconception in the mind of people like you and I If I tell you some data, then only 6% of the entire Indian population Pays taxes, this is a very small number So even if the government reduces the income tax Then its impact will be very small in the overall economy The chances of consumption increasing in the overall economy is not much That just by reducing the income tax, the consumption will increase So if I talk about one more point that a sometime ago, India’s finance minister, Nirmala Sitaraman Cut down the corporate tax rate She reduced the corporate tax rate and also the GST was reduced in a lot of services So whenever the government brings changes in the tax, then the collection the government has There is a big effect on that So these two things that Nirmala Sitaraman did Because of that, on India’s tax collection there was an effect of 1.45 lakh crore So seeing this, it seems difficult that the government will cut the tax more Because if the government reduces the income tax a little Then the collection of the government will have a worse effect And if the collection becomes less, then the fiscal deficit will go up If the fiscal deficit goes up then India’s inflation will go up So the negative effect of this, will happen to you as a normal taxpayer and investor So let us talk about the second point that retail investors like us should look at and see how budget relates to it And how the announcement related to it comes out So I just told you its very difficult for the consumption to go up with tax being cut So to take consumption up Some schemes and announcements have to come out, which can be spread around a lot of people Because when more people get money, they start buying more things When they start buying more things, the company starts to get more profits Which will boost the overall economy So in this budget we have to see whether the government will bring about sector specific announcements Now you must be thinking what sectors the government is going to pay more attention to So as I said it is very important here for it to reach the most people More common people get the money So the government should pay most attention to those sectors that are more employment intensive Because where the industry is more employment intensive There more people will be associated with that industry So whenever the government gives money to a sector then that money goes to the companies And from the companies it goes to the people who work in that industry So the government would want that three main industries That are very employment intensive Like the manufacturing industry, infrastructure industry And the construction industry Then there are a lot of chances for the government to pay attention to these three industries And we can see that there can be sector specific announcements related to these three sector in this budget I took the name of these sectors because related to these three sectors there are some data points that tell us that these sectors are in downturn If I talk about the manufacturing sector, then data tells us that now grows by 3% Which is the lowest number in that past 13 years Apart from this if I talk about the construction sector Then it is now growing by 3.3% So if I talk about the construction sector then now it is only growing by 3.3% Which is a very small number So it very important that the government pays attention here And we get to see that these two three sectors get a lot of focus And some announcements are made in these particular sector Now I will talk about the third and very important point which impacts retail investors like us a lot We often think to invest in such companies that are PSUs In which the government is thinking about disinvestment or disinvestment has taken place Because all these factors impact you a lot as retail investors And if I talk about, whenever the government reduces the rate and there is some problem in their tax collection Because it is very important for the government That the government has to maintain that the boosts in the economy has to happen at the right time For which they have to spend money So to cover their expenditure, the government often disinvests from companies If I explain disinvestment in very simple terms So the government owned companies, it sells its stake because of which they government gets a lot of money And the government always says that they are thinking of disinvesting Like it was first tried to disinvest from Air India But that hasn’t happened yet So maybe in this budget we will get to see And it should happen that the government should get a time bound disinvestment What are those companies where the government feels they should disinvest And if they want to disinvest, how much should they disinvest It should be a clear target of disinvestment So that retail investment can base their investment on this target So apart from all these pointers I will tell you a a very interesting number through which you can get a lot of learning If I talk about a number then there is something called nominal GDP and real GDP Nominal GDP is that which includes inflation And as we say that if we remove inflation from something that has increased, that becomes our real growth Which tells us our growth after removing inflation The number I told you at the beginning I told you about real GDP growth Now I will tell you how much growth took place in nominal GDP And how low or high that percentage has gone So if I talk about July 2018 At that time the growth of India’s nominal GDP was 12.6% If I talk about July 2019 Then they growth of India’s nominal GDP has reduced to become 7.9% So the GDP has reduced but the government is making a lot of efforts to increase the consumption so that the economy has a far reaching effect Because if our consumption increases, then our industries will benefit If the industries benefit, the overall industries also benefit So this is a full cycle, in which the government will try that the budget that’s about to come A lot of attention is being payed to fiscal policy so that our economy that had gone down a little, it will come back on track This video I made had purely one objective That every industry has one expectation from the budget In the same way a retail investor, might be you or me You should also have an expectation related to the budget And you should know what you should expect And what are the logical point behind that expectation Whether that expectation can be met or not Because all these pointers that we discussed All these targets that we discussed that the government told us about last year The economic survey will tell us whether they were achieved or not And what are the announcements in the budget We can only make a speculation about that But the announcements that are going to happen, that our finance minister Nirmala Sitaraman will tell us during the time of the budget, what announcements are going to be made So you can set your expectation from now itself Then around that expectation you can do your research You can read and find out that the expectation you have About that if an announcement can be made How that impacts your investment Because a lot of time it happens that during the pre budget rally the market goes up and down a lot Because there it is just a speculation And a lot of retail investors lose their money at that time And a lot of retail investors start investing the day after the budget comes On listening that something becomes cheaper or more expensive So you should get out of all these things and plan your investment And in your investment you should see which company falls in which industry And related to that industry what are the expectation from this budget And related to those expectations what are the announcements the government made After doing this research thoroughly Only then you should plan your investment You should never spoil your money by following a rally or momentum This video that we made was purely for educational purposes We do not predict what can happen in the coming time and whether the targets will be achieved or not Because all these things are fact based, when the facts come out, we will know about it If you liked this video, press that like button Comment down below and let us know what your expectations are from the 2020 budget And how that can impact your investment If you haven’t yet subscribed to this channel, then please subscribe Because we bring 2-3 videos every week on this channel about financial knowledge Which can help you become a very good and intelligent investor Happy investing!