The Theme Of The Budget: In my opinion the Finance Minister through this Budget has tried to stimulate the rural demand. In the recent past, India had been exposed to excessive capitalism (or basically the influx of excessive capital from foreign investors) thus becoming overly sensitive to the incidents overseas. Even the smallest bad news in Wall Street and other markets would have a "Cascading Effect " or " The Snowball Effect " on the capital markets here back home. This became evident in the financial meltdown/ "recession phase"as many would term it. However, the backbone of the Indian economy that is our bank and insurance remained relatively insulated thanks to the stand of "Restricted Capitalism" (nothing but keeping a close eye and intently monitoring the flow of funds from overseas) taken by the then RBI governor Mr Reddy. Taking a serious learning from this Mr Mukherjee has tried his level best to decouple India from the capricious global markets and thus to encourage rural demand which provides a relatively stable sustenance.
Highlights Of The Budget:1.Mr Mukherjee has given due importance to the infrastructure sector increasing the allocation to the NHAI (National Highway Authority of India) by almost 23%. He has also promised that infra investment would exceed 9% of GDP by 2014 (hope he keeps it though).
My view:Its imperative that we spend a substantial portion on the infrastructure of the country as this proves to be a valuable asset in the long term. Infrastructure also has the distinct character of providing bulk employment, and a country like India is in a dire need of good infrastructure to attract foreign capital and businesses.
2. The FM (Finance Minister) has lowered the interest rates for farmers to 6% , increased the allocation for NREGA(National Rural Employment Guarantee Act which seeks to provide a minimum of 100 days of work to adult members of every household willing to do public work at statutory minimum wages) by about 144 % , allocated about 7000 cr for rural electrification, 2000 cr for rural housing and provided full interest subsidy for the education of poor children.
My view:I laud the finance minister for he has stood by the common man with the promulgation of these policies. Its imperative that we nurture our rural markets for its can provide the boost that we ought to have enter the list of developed countries. However, all well said the onus now lies the rigid and corrupt Indian Bureaucracy for the implementation if these policies which I doubt will happen without any loopholes.
3.The FM in his Budget speech just hinted at divestment at failed to provide a clear road map on the government's proposal to bring down the fiscal deficit (the excess borrowing as against the earnings).
My view:This is one of the reasons why the stock markets fell to new lows on the lovely Monday morning. There was a growing concern primarily on the part of FII( foreign institutional investors which includes all the top shot i-banks which people like me aspire to work for) on the excessive government borrowing program as the govt expenses have been estimated at a staggering 10.2 lakh crores as against its earning of about 6 odd lakh crore. Thus there was widespread pessimism on account of absolute govt complacency which push the markets into the red. Excessive govt borrowing is like to push interest rate upwards( the basic philosophy behind this is that since govt is borrowing excessively there will in turn be heavy demand for credit and this gives bankers opportunity to charge excess rates). The fiscal deficit has been estimated at whooping 6.8% (which is considered highly unstable in the long term at least by most economists). These expense although are justified since we are witnessing extreme times of uncertainty.
4.There was no indication on the deregulation of oil and crude prices. The FM just proposed the formation committee to look into the matter.
My view:Another reason for the stock markets having entered the red zone. There was a phase when crude prices had touched the $ 154/ barrel mark on account of excessive speculation and hedging( saving for future and protecting for risks). Thus the government had to regulate these unsustainable prices to provide cheaper crude to the Indian consumer.As a result of these regulatory mechanism most of the oil companies had run into massive losses to the tune of hundreds of crores everyday. This added to the massive fiscal deficit last year which had some eyebrows at that time and criticized the govt for not bringing the prices in sync with those in the international market. Since if the government interferes in the crude prices it runs into huge losses.
5.Finally the FM vouched to introduce the GST(The Goods and Services Tax) by 1st April, 2010.
My view: I honestly welcome the introduction of this new avatar of the previous VAT(Value Added Tax imposed on all commodities). Quite contrary to most beliefs this tax will now reduce prices of some the commodities since it plans to scrap the previous VAT. Previously Vat was imposed in four slabs which varied from state to state, thus there could have been an instance where the VAT charged in UP was 3% and that in MP its neighbour was 6%, thus resulting in great fluctuation of prices. With the introduction of GST the government will now impose an unified GST across all states thus ending their monopoly on the VAT and according to announcements the GST will be levied in only two tax slabs thus greatly reducing the prices of certain good.
Watch this space for more on the fallout of the Union Budget.
No comments:
Post a Comment