Budget 2024 reactions | Dinesh Kumar Khara: Budget well-balanced; to focus on inclusive growth in economy: Dinesh Kumar Khara

This Budget has struck the right chords. It is a Budget which, in a sense, has balanced growth and also government’s vision of sab ka saath, sab ka vikas. In your mind, what was the big standout feature?
Dinesh Kumar Khara: The Budget is something that is going to focus on the inclusive growth in the economy. Very clearly focused in terms of employment, skilling and MSME, which are the key pillars when it comes to the inclusive growth and also, they are having a very sharp focus for building the productivity and the resilience in agriculture and also, when it comes to the youth, employment and skilling, that is something which is a very critical resource for the economy, how to make the best use of such resources and at the same time as far as manufacturing and services are concerned, MSME is one of the core focus area, urban development, PMAY, etc, and that is something which will really give a significant fillip to the real estate sector in the urban areas.

Coming to energy security, again, focus on nuclear plants is something which will go a long way in terms of the green initiative of the economy. And last but not the least, the infrastructure focus is going to be a major push for the core sector of the economy. It is a very well-balanced and very inclusive budget which has been presented by Honourable Finance Minister.

While the Budget talks about renewed focus on urban housing, do you think something more could have been done purely to kick-start the rural part of the economy directly or indirectly apart from focus coming on housing because historically when the rural economy had been kick-started, it has been done via several schemes and government initiatives. But that punch was not there.
Dinesh Kumar Khara: What has been done is that now, particularly for the rural economy, the way they have thought in terms of digitising all the land records and ensuring that the KCCs, etc, should be available through the JanSamarth Portal, that is something which will make the availability of credit much easier for the rural economy.

That itself should work very well. On top of it, when the rural centres gets linked up with the major markets, thanks to the road infrastructure which is coming up, this will be the other area that will help the rural economy to pick up. That is my understanding of the initiatives which have been taken.The other important indication from the Budget was that the macro piece is coming under real strength. Fiscal deficit is down. Tax assumptions are very conservative. Some would also say that the expenditure numbers are not also curtailed and despite that, fiscal commitment is on. What impact do you think this could have on interest rates and how the cost of borrowing could move in the system?
Dinesh Kumar Khara: When the borrowing calendar itself has indicated that the government borrowing is going to be much lower as compared to what was earlier envisaged in February, that itself has got a salutary impact on the yields which eventually will trend southward. That is something that will happen. With that, the general, it is more indicative, but nevertheless, there is something which will happen and also, it is a reflection of the fiscal discipline and invariably we have seen that the fiscal deficit is looked up by all the global rating agencies, which also means that even the borrowing which is done in the overseas market, will become cheaper. So, eventually, all this will tend towards lower interest rates. Though, of course, these are the indicative numbers, but eventually we will look at it. When we look at it, this will have an impact on the overall interest rate structure in the economy.Despite the government push, why is private sector capex not coming up to satisfactory levels? You are in the right position to tell us which way that chain is moving.
Dinesh Kumar Khara: No, one, of course, we had already started seeing some green shoots and we hope that as far as the mid corporate was concerned, there was a decent trends which were seen. Similarly, in SME also, with the kind of focus which has been brought in for SME in this budget also, I am sure it will further give the push to the MSMEs and likewise, the mid corporates also, because when it comes to the core sector of the economy, the kind of levers which have been introduced in this budget will certainly have the positive impact on the core sector of the economy. So, this will certainly encourage the private sector also to really increase their investment and which will probably address the need of the hour.

The Budget had a lot of focus on green energy, renewables, water and waste management. I distinctly remember you were one of the first banks who started even thinking of lending in that area when these topics were not on the radar. But now the renewed focus is coming back. Would SBI be looking at perhaps lending more in these areas with the government focus coming back?
Dinesh Kumar Khara: Oh, yes, very much because when we look at the PM Suryoday initiative, I believe it is going to be a game changer. I very firmly believe that this is going to be the energy conserver and also, there is a natural buy-in for a very large number of Indian population and they can save their electricity bill.

Similarly, when it comes to solar power, that is one initiative which will lead to a new lever of growth, in terms of solar cells, solar panels, and also the services sector in terms of deployment of these solar panels in large number will also be happening. In addition to that, a mini nuclear plant initiative has been announced in this Budget. That will also go a long way in terms of supporting our initiative in terms of green power.

Overall, the initiative for battery storage, the initiative for solar and nuclear, are things which very clearly is a reflection of the country’s focus on climate initiatives.

One of the issues for banks has been that the liability franchise is not getting created. Savings is getting diverted to equities, to F&O, speculative aspects. But this Budget has taken some brave measures to increase STT, increase long term and short term capital gains tax and change the tenure. Do you think that could have implications on how the liability and savings are going to move back to banks?
Dinesh Kumar Khara: When it comes to deposit versus market instruments, it is nothing but a choice of the asset class which people go for. They are invariably used to evaluate the risk and return relationship. Now, in this particular case with the tweaking which has been done to long-term capital gain and the short-term capital gain, perhaps the gap in terms of post-tax returns for the banks as well as for the market instruments will narrow down a bit.

Nevertheless, it would still be the depositors’ choice whether they would like to place it with the bank deposit or they would like to keep it in the market instruments. I think we will have to wait and watch how it pans out for the deposit for the banking system. But at the same time, when it comes to F&O, perhaps the intention was that those who really understand this product should come in and those who understand the risk inherent in the product should come in and others should stay away. That is what the intention seems to be and with that in mind, the new introduction in terms of the charges and tax which will be there has been introduced.