Fiscal prudence can help bring down the cost of capital
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The government continues to walk the talk on the path of fiscal prudence. The glide path 2026-27 onwards envisages fiscal deficits such that the percentage of government debt to GDP keeps falling. This is a very big and ambitious statement for a developing economy like India. These targets are being achieved without compromising on the quality of receipts and expenditures. Building such a track record should bode well for the country as this can help the cost of capital come down. The budget contains a slight dose of reality for the capital markets with capital gains tax-short-term and long-term-getting raised. Equity markets are running significantly ahead of fundamentals with the market cap-to-GDP ratio touching an all-time high of 150%. Several mid & small-cap stocks are trading at a P/E ratio of 80-100. Sebi cautioned against the exuberance, especially in the F&O market. Taming such overenthusiasm in time is important for main...