Budget 2015 should not be a populist one: Deepak Shenoy, Capital Mind

The AAP clean sweep in Delhi has put immense pressure on the the NDA government now to go for a propoor Budget and not administer the "bitter medicine" that Prime Minister Narendra Modi claimed was needed to rescue the economy. AAP has set senior BJP leaders thinking that it may not be wise to abandon all populism in the Budget. In a chat with ET Now, Deepak Shenoy, Founder, Capital Mind, explains why a populist Budget would not be a great idea at this point of time. Excerpts:
ET Now: Will Budget 2015 change things for good or bad?

Deepak Shenoy: I think bad. I may be wrong. I have been wrong about a lot of things before.

ET Now: Given what transpired in New Delhi, most people think that this is going to be a “this is it” Budget for the BJP government?

Deepak Shenoy: I actually believe that if they resort to some kind of populist measure, it would be a bad thing because they would miss on all the other things that they have been talking about so far. They have a 9% nominal growth, GDP growth is probably going to be something like Rs 136 trillion next year.

Given that their FRBM targets are 3.6%, it does not give them much of room to introduce any large populist policy. If they did do something like that or reduce taxes, they would miss their fiscal deficit numbers and then all the work they have done so far will go in vain.

Therefore, I believe they will probably ignore this and carry on doing the good work. We have a majority in power anyhow so we believe that this budget needs to be bad and it is probably going to be bad because that is probably the right thing to do. We will have to get the fiscal house in order before doing a bigger budget next year.

ET Now: I want to take it straight to the earnings disappointment that we have seen and let us not talk about the whole season but the last three or four days which have been abysmal, L&T, mid-sized companies, financials across the board there have been disappointments.

Deepak Shenoy: Absolutely. About 7% lower profit on cumulative basis from last year’s December quarter. This is the first time I have seen negative growth in really long time.

ET Now: This will give you an opportunity to re-enter the market or do you believe the earnings downgrades would take a lot of these losers or stocks which have posted bad numbers much lower than where they are right now?

Deepak Shenoy: Some of them are overvalued. They definitely have a lot of scope to go a lot lower than here; however, the budget is going to change everything so right now you could not take a long-term decision without waiting for the Budget.