Sometimes its difficult to understand if market forces are determined by economy or economists. If its the latter, then we are living in a superfluous economy. Sensex crashed through the day by over 800 points as the budget was announced. And Mr. Pranab Mukherjee, is not a worried man and rightly so.
There are of course quite a few good things about the budget that people are missing out on. The Aam Aadmi has been taken care of and some actions have been in lieu with the existing programs like the Bharat Nirman, and there have been extensions to the earlier UPA programs. I think the disappointment is there because of the absence of reforms. But frankly there is nothing we should be worrying about. There has just been a slight correction in the market, that was riding on the anticipation of reforms by the newly formed stable government.
Let me remind you, that the world is not completey over the financial crisis and our priority still remains stability of our system, and sustainable growth.
Clearly the focus of the budget was on achieving a 9 % GDP growth and the growth imperative has triumphed over the fiscal deficit imperative this time. This signals that the government wants the money to be with its people for stirring up the dynamics. It would have been easier, like reformists thought, to focus on the deficit right now by some policy announcements but nothing in that direction has been seen. But that doesn't mean, there wont be any reforms. (Remember left is out of the government now). The current budget lays down the roadmap of future actions. And in simple terms, it is a realistic budget. It is what our economy deserves at this time. Fiscal deficit will surely be brought down but gradually and at a little later stage. For few more months, growth will remain the primary focus and when the next interim budget will be announced in early 2010 large scale reforms may be expected.
The loan waiver scheme for farmers has been extended by 6 months, there has been increase in exemption from Income Tax for women and senior citizens, army personnel has got some grants, students too have some subsidies, generation of 1.2 million jobs every year, and some items as usual became cheap and vice versa.
It indeed is a cautious budget, but if the tone of budget speech is anything to go by, we are in for some crucial developmental reforms in the coming months. Also disinvestment in public sector undertakings seems to be on cards. Only if people give it some time to materialize. Reforms cant be decided in a month of forming a new cabinet.
While all the debate of the goodness or badness of this budget will go on for some time, the wisest thing, perhaps, would be to wait and watch for Dr. Mukherjee's actions in the coming months.
Good Luck UPA!
