In an interview with ETMarkets, Ambani said: “The Budget was satisfactory and largely in line with expectations. While some may perceive slower growth in the government’s capital expenditure on roads and railways for FY26, the overall capex has been maintained at the desired levels, as a percentage of GDP and total expenditure,” Edited excerpts:
Thanks for taking the time out. The Budget 2025 – 8th Budget of Nirmala Sitharaman delivered what was needed to boost consumption, but it lagged a large capex push. What are your views on the Budget?
The Budget was satisfactory and largely in line with expectations. While some may perceive slower growth in the government’s capital expenditure on roads and railways for FY26, the overall capex has been maintained at the desired levels, as a percentage of GDP and total expenditure.
Notably, there has been a significant increase in grants-in-aid to states for the creation of capital assets, highlighting the government’s focus on capex with a higher multiplier effect.
With the proposed fiscal consolidation efforts and targeting a 4.4% fiscal deficit, what does it indicate about the macroeconomic stability of India?
The Modi administration appears committed to fiscal discipline, not only by targeting a lower fiscal deficit but also by aiming to reduce government debt levels.The government has introduced a revised fiscal consolidation framework that links fiscal deficit targets to central government debt. The objective is to bring government debt down to approximately 50% (+/-1%) of GDP by FY31, from 57.1% in FY25.
This effort can help bring the fiscal deficit closer to the earlier FRBM target of 3%. Lower fiscal deficit, reduced government debt, a lower current account deficit, and sustained 7% GDP growth in the long run underscore India’s strong macroeconomic stability.
With marginal increase in the proposed public capex, do you see private capex picking up meaningfully this time around?
Notwithstanding government incentives, broad-based private capex growth has remained elusive due to sub-optimal growth in private final consumption expenditure.
A potential revival in private consumption, driven by tax cuts, could provide some impetus to private capital expenditure. Some may argue that tax cuts will not significantly boost consumption, as only a small percentage of the population pays taxes. However, the trickle-down effect of these measures cannot be ruled out.
Moreover, the government is prioritising growth in domestic manufacturing and MSMEs to support employment growth. Even as economic conditions improve in India’s hinterland, resource allocation continues to favour the rural economy.
At the same time, the urban economy is receiving a significant boost in fiscal support in this budget, which should help private consumption get back on track and grow around the pre-COVID average of 7%.
Which sectors according to you are major beneficiaries from the Budget 2025?
Given the budgetary emphasis on boosting private final consumption expenditure and the resulting increase in household disposable income, it is natural that consumption-driven sectors such as consumer durables, FMCG, hospitality, and leisure have emerged as key beneficiaries.
However, I would also highlight sectors that stand to gain from higher state capex allocations—particularly through grants to states for the creation of capital assets—such as renewables, water utilities, and e-bus infrastructure.
How do you see the rationalization of income tax slabs under the new regime impacting investor participation in the financial markets?
Lower taxes for the middle class will result in higher disposable income for households, which can lead to increased savings. A portion of these savings may be channelled into equity markets, boosting investor participation.
How will the increased allocation for capital expenditure in FY26, especially for infrastructure development, benefit sectors like construction, real estate, and industrial manufacturing?
The government remains focused on driving growth in manufacturing and ensuring steady credit flows to MSMEs, which should boost overall industrial activity.
In terms of capital expenditure, the government is maintaining the share of productive expenditure as a percentage of GDP, which will drive the creation of capital assets and provide a strong impetus to sectors like construction and real estate.
The focus on clean energy and the push for nuclear energy are key themes in the budget. How do you foresee these reforms driving growth in the energy sector?
An outlay of Rs20,000 crores for the research and development of Small Modular Reactors aims to achieve at least 100 gigawatts of nuclear energy capacity by 2047.
Additionally, amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act are being pursued.
Since these reactors are standardized and pre-fabricated in factories, their deployment is significantly faster and can be implemented in remote locations—ensuring safe and long-term energy security for areas lacking sufficient transmission infrastructure.
This initiative will encourage greater private sector participation in developing nuclear energy infrastructure and play a crucial role in India’s energy transition. In the long term, the industry may also witness the installation of nuclear captive power plants.
How should investors plan their asset allocation post-Budget 2025? If someone plans to invest say 10 lakh.
Assuming we are creating a fresh portfolio, I would guide for a 60% allocation to equities and 40% to fixed income and other assets for an investor with a moderate risk profile. The market fall offers a good opportunity for incremental allocation.
The uncertainty around trade wars looms large — what does history suggest and how should one approach the markets?
Trade wars create uncertainty and can suppress global trade. Notably, US President Donald Trump’s rhetoric on imposing tariffs on various nations has reignited global apprehensions about trade policies.
However, tariffs are not a universal tool that can be wielded effectively in all circumstances. Under a potential Trump 2.0 administration, we anticipate a shift from the aggressive tariff policies of his first term toward a more balanced approach that incorporates trade negotiations.
While tariffs may remain part of his policy toolkit, their application is expected to be more restrained and strategic, with a greater emphasis on forging trade deals.
During Trump’s first term, his administration used tariffs as a primary tool to address perceived trade imbalances and protect national interests. While these measures disrupted global trade, they also paved the way for future negotiations.
In a second term, Trump’s approach is likely to evolve, as the global landscape is now better prepared to engage with the US on trade matters.
Several nations have already signalled openness to reducing import duties or increasing imports from the US to foster stronger economic ties.
This shift in global readiness could lead Trump to move away from broad-based tariffs and toward more nuanced trade agreements.
Rupee hitting fresh lows vs USD. How will it impact sectoral earnings and market mood?
A weaker Rupee can help IT, Pharma and other export-oriented sectors. However, a depreciating rupee can also fuel inflation and increase input costs for many manufacturing companies, potentially impacting their earnings.
Markets are generally uneasy with such sharp depreciation. That said, I believe the INR will stabilize moving forward.
Q) How are FIIs looking at Indian markets, especially after the Budget? Could you let me know if you have any queries?
A) We keep getting FII queries all the time. Notwithstanding the near term rebalancing towards US assets, India is looked upon as a long term attractive opportunity.
The government’s commitment to lower fiscal deficit levels as well as lower government debt levels makes the case for India even more attractive.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
