Saurabh Mukherjea stocks: If I were FM: Saurabh Mukherjea’s list of 3 dos and 3 don’ts for Budget 2023

Saurabh Mukherjea

Founder & CIO, Marcellus Investment Managers

Mukherjea is the Founder & CIO of Marcellus Investment Managers (https://marcellus.in/). A London School of Economics alumni, he has over two decades’ experience in equity research and investment, and has spent much of his career figuring out the length and breadth of the Indian equity market. Someone described him as the missing piece of a sane thought leader in Indian equities. Mukherjea is author of the widely acclaimed book. Coffee Can Investing: The low risk route to stupendous wealth, besides two others — The Unusual Billionaires and Gurus of Chaos. His newsletters on Indian markets and investment practices are most widely read.

If I were India’s Finance Minister, going into the 1st February 2023 Union Budget, here are three things I would try to do:

1. Be generous to Indians earnings Rs lakhs per annum. It is clear from the results posted by a wide range of companies eg. the large FMCG manufacturers, a whole range of large pharma companies, the microfinance lenders, etc that the poorest sections of the Indian society have been pulverised economically by Covid-19. In this context, the Government’s announcement a month ago to distribute free food to the poor for another year makes a lot of sense. However, with employment generation for this strata of society continuing to be a challenge, more generosity is required in the Union Budget in terms of relief measures like PM Awas, ECLGS and NREGA to support low income earners in India.
2. Aggressively pursue the disinvestment agenda in the Banking sector specifically. Public sector banks are in the best financial shape I have seen in the 15 years I have lived in India. Given their well understood compensation and IT challenges, it is highly unlikely that their balance sheets will stay as pristine as they are today for very long. This therefore presents a golden opportunity for the Exchequer to sell at least three large public sector banks between now and the General Elections. To that end, the Government should request the RBI to ease the rules to allow Private Equity funds, Sovereign Wealth Funds and large Indian corporate houses to buy these large PSU banks.
3. Allow the 2% of PBT that companies currently have to spend on CSR to be redirected to spending on training & personnel development. India Inc needs a more copious supplier of skilled workers to deal with the double digit wage inflation we are seeing in factories, in Financial Services firms and in IT Services. More than university graduates, we need youngsters who have practical skills which make them valuable in manufacturing, operations and sales roles. India Inc should be given the license to set up Technical Education Institutes which can impart such practical training and thus drive mass job creation. The funding for these institutes can come from 2% of PBT that is currently earmarked for CSR. In order to enable this to happen, we need to see an enabling directive from the Government of India.

Finally, if I were FM there are three things that I won’t do in the budget: increase taxes (given the evident buoyancy in tax collections), give any tax related concessions to the financial markets (given the robust pace of financialisation in India) and give in to subsidy demands from this or that sector which claims to be strategically important for the nation (we have seen how that movie played out in the pre-1991 era).

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