Active Stocks
Fri Jun 14 2024 15:58:47
  1. HDFC Bank share price
  2. 1,597.45 1.05%
  1. State Bank Of India share price
  2. 840.20 -0.44%
  1. Tata Steel share price
  2. 183.05 0.30%
  1. ICICI Bank share price
  2. 1,105.10 -0.20%
  1. Kotak Mahindra Bank share price
  2. 1,717.00 -0.54%
Business News/ Markets / Stock Markets/  Modi 3.0: Stability concerns premature; government may stay fiscally prudent amid populism: Kotak Securities
BackBack

Modi 3.0: Stability concerns premature; government may stay fiscally prudent amid populism: Kotak Securities

Kotak Institutional Equities says concerns over the stability of the coalition government are premature, and the government may remain fiscally prudent and use populism opportunistically.

BJP’s lower seat count may not result in a significant impact on fiscals. (Agencies)Premium
BJP’s lower seat count may not result in a significant impact on fiscals. (Agencies)

Concerns over the stability of the current coalition government are premature, and the current government may remain fiscally prudent and use populism opportunistically, according to a note from brokerage firm Kotak Institutional Equities (Kotak Securities Limited).

"Fears of the current coalition government being unstable are too premature. The more probable outcome would be slower decision-making with the slower passage of legislative agendas, given a larger opposition and major executive decisions requiring a more consultative approach," said Kotak.

Also Read: Modi 3.0 Cabinet: From Amit Shah, Nirmala Sitharaman, Jaishankar to Rajnath Singh – 10 ministers who retained portfolios

"All solutions to electoral losses need not be translated into populism and away from a macro framework built over the last decade. We expect the government to remain fiscally prudent and populism to be used opportunistically," Kotak said.

Prime Minister Narendra Modi was sworn in as prime minister for the third consecutive term on Sunday, June 9, along with his 71 ministers. 

He allocated portfolios to the newly elected ministers in his cabinet on Monday, June 10, and the first cabinet meeting took place in Delhi on the same day.

Read more: Modi 3.0 Cabinet Live Updates

Kotak Securities expects the coalition government to see an increase in compromises, and the interests of coalition partners will need to be given relatively higher priority due to the weaker strength of the Bharatiya Janata Party (BJP) in National Democratic Alliance (NDA) 3.0.

"Demands from Andhra Pradesh and Bihar for higher budgetary allocation (comparable with special status) may result in at least 500 billion additional allocations. The executive agenda may become more consultative," said Kotak.

However, BJP’s lower seat count may not result in a significant impact on fiscals.

"While BJP’s lower seat count will be linked to the need for more populism, we believe that not all solutions need to be fiscal-led," said Kotak.

Also Read: PE ratio ineffective for valuing certain sectors and stocks in India: Kotak Securities

The brokerage firm underscored that assembly elections in Haryana, Jharkhand, Maharashtra (all in Oct-Dec 2024) and Bihar (November 2025) could imply populism on the state government’s agenda rather than the Centre’s.

"The Centre will likely continue to focus on (1) fiscal consolidation, (2) steady infrastructure spending, (3) basic spending such as on education, health, shelter, and security, and (4) efficient delivery of rural-based programs. Loans for capex to states could be increased with a lower share being conditional," said Kotak.

Kotak believes the risks of a more populist Union Budget would increase if the upcoming state elections’ results turn adverse for the BJP.

Also Read: Brokerages see likely gain in FMCG stock with BJP’s return to power

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

3.6 Crore Indians visited in a single day choosing us as India's undisputed platform for General Election Results. Explore the latest updates here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 11 Jun 2024, 01:03 PM IST
Next Story footLogo
Recommended For You
GENIE RECOMMENDS

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started