The Union Budget is one of the most closely tracked events by various market participants including investors, brokers, regulators, policymakers, etc. And this is for good reason. During the Union Budget, the Ministry of Finance outlines its plans to allocate money to the various sectors, industries and other places like subsidies, allocation to various states, etc.
The Union Budget 2022–23 was also an important one. We did a quick wrap-up of the budget, outlining estimates of where the government financed the budget from and where it spent the money. Click below and take a look:
Every year, the budget developments open up new investment opportunities for investors. As you may already be aware, Windmill Capital builds portfolios on simple ideas — spanning broad economic and sectoral themes, megatrends that shape our future, and much more…
Developments in the budget give very actionable insights into investment opportunities for our investor base. We thought of outlining the various relevant budget developments and what each would mean for some of our smallcases.
A well functioning logistics ecosystem is vital for a fast-growing and healthy economy. It facilitates the movement of goods from the point of production to the final point of consumption. Simply put, it forms the backbone of the economy and is an industry on which the supply chain of the economy relies. Needless to say, it enjoys focus from the government and this budget session was precedent to that.
The government launched the PM GatiShakti plan as an initiative aimed at coordinated planning and execution of infrastructure projects to facilitate seamless logistics. As part of this year’s budget, the govt pledged to expand The National Highways network by 25,000 km in 2022–23. ₹20,000 crore will be mobilized through innovative ways of financing to complement the public resources. Moreover, the data exchange among all mode operators will be brought on Unified Logistics Interface Platform (ULIP), designed for Application Programming Interface (API). This will provide for efficient movement of goods through different modes, reducing logistics cost and time, assisting just-in-time inventory management, and eliminating tedious documentation.
The government allocated ₹2.24 lakh crores this year towards this program — the highest ever. To help investors efficiently track and invest in the logistics ecosystem, we built the Transporting India smallcase.
The PM Awas Yojana was launched with the aim of building 2 crore affordable houses. A number of companies spanning different segments like cement, paints, housing finance, electricals, building products, etc are set to benefit from this.
The government pledged to help the building of 80 lakh homes in this financial year. We built the Affordable Housing smallcase to help investors efficiently track companies participating in and benefitting from affordable housing projects.
The EV ecosystem is arguably one of the most transformative trends of the coming decade. The sector is expected to transform the entire auto industry as countries across the globe increasingly promote its usage. Companies and the government are working together to address key issues of the sector.
As was widely expected, the government was expected to address key announcements that would pave the way for growth of the sector in the coming years.
The government allocated ₹2,908 crores this year towards the EV ecosystem— the highest ever, including a key battery-swapping policy and an enhanced focus on paving way for adoption of EV in public transport in urban areas. The Electric Mobility smallcase comprises of companies driving India’s transition to electric vehicles and investors looking for exposure to this theme can consider looking at the smallcase.
Digital and Telecom infrastructure
The advent of covid-19 has surely made us realise the importance and scope of the digital infrastructure in our daily lives. The government has too realised the vitality of digitisation during our teams — its benefits and overall impact on economic growth. The government touched up on various schemes that support the digital revolution.
- Digital Banking: In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country. Government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner. Taking forward this agenda, and to mark 75 years of our independence, it is proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks.
- Telecom: A ground-breaking announcement made by the government during its budget speech was that the spectrum auctions for laying down infrastructure for 5G will be conducted this financial year. This will facilitate the rollout of 5G mobile services within 2022–23 by private telecom providers. Additionally, key announcements were made to enhance infrastructure of mobile and internet services in rural and remote areas.
- Digital Currency: The introduction of Central Bank Digital Currency (CBDC) will give a big boost to the digital economy. A digital currency will also lead to a more efficient and cheaper currency management system. It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies and will be issued by the RBI starting 2022–23.
A number of companies are set to benefit from the digital revolution that is about to come, and to help prospective investors benefit from the same, we built the Digital Inclusion smallcase.
Agriculture and the Rural Economy
Agriculture is the primary occupation of a majority part of the Indian population, especially in the rural areas. Over 700 million people live in rural areas — that’s roughly 12% of the global population! If India wants to grow, it must facilitate the growth of the rural economy. Many consider rural India to be the economic powerhouse over the next decade or so. Thus, the segment enjoys increased focus from the government, especially during the budget. For example, use of ‘Kisan Drones’ will be promoted for crop assessment, digitization of land records, spraying of insecticides, and nutrients. Moreover, the government is will also setup a dedicated fund to finance startups for agriculture and the rural enterprise.
As these developments take shape, rural India is expected to grow. In turn, a number of companies that derive a majority or at least a significant amount of their revenues from rural India are also expected to do well. So we built the Rising Rural Demand smallcase.
Spending on infrastructure has a host of benefits, especially during times of economic turmoil as it helps revive economic growth. Infrastructure spending, also called capital expenditure, firstly helps in productivity. The development of roads, railways, highways, airports, schools, hospitals, warehouses — all of these generate employment, boost consumption and hence increase the standard of life of the population. Needless to say, the government stepped up infra spending sharply by 35.4% from ₹5.54 lakh crore in the current year to ₹7.50 lakh crore in 2022–23. This has increased to more than 2.2 times the expenditure of 2019–20. This outlay in 2022–23 will be 2.9% of GDP.
Overall, this is great for the infra sectors and a number of listed companies are going to be positively impacted by such a development. And yes, we have an efficient way for investors to track this too! The Infra Tracker smallcase.
And that’s a wrap. For more such insights and updates, follow us on Twitter @windmillcapHQ.