In a bid to achieve the fiscal deficit target, the government has cut down on its capital expenditure by 80 per cent in February and March, according to Naveen Agarwal, Managing Director, Motilal Oswal Financial Services.
In a bid to achieve the fiscal deficit target, the government has cut down on its capital expenditure by 80 per cent in February and March, according to Naveen Agarwal, Managing Director, Motilal Oswal Financial Services. In an interaction with CNBC TV18, Agarwal said the government is contributing to the slowdown rather than uplifting the corporate sector. Earlier it was only investment which was looking lacklustre but now the slowdown has crept into consumer and exports also which need some intervention from the government. This is a lost year for volume growth across several sectors and the entire supply chain is engulfed in the liquidity crisis which will take longer than expected to recover, said Agarwal.
Earlier, the government was fuelling 80 per cent of the capex cycle. That government expenditure has fallen by four-fifths in February and March. People are hoping that the spending will revive, but it is not coming back, said Agarwal. He also gave an example of one of the unlisted south-based company which is engaged in critical disease eradication and has not received any payments for last 4-6 months from the south-based state government.
Talking about the slowdown in the auto sector which is facing liquidity and inventory issues, Naveen Agarwal said looking at the shutting down of dealership in the auto sector, it can be a structural slowdown. Given the pervasiveness of the slowdown across sectors, there are hopes pinned for some response from the government which might provide some relief to the corporate sectors, according to Agarwal.
“There were some companies pinning their hopes on the festival season and government stimulus package but by and large this seems to be a lost year in terms of volume growth for a lot of businesses and this decline in volumes could eventually feed into corporate earnings,” said Agarwal.
Private banks and insurance sectors are the ones which look robust going forward said, Agarwal. Gloom and doom times drive stronger growth in the insurance sector, said Agarwal adding that the life and health insurance look robust in the coming times.