Budget 2013: What do markets want?

Budget 2013should reduce subsidies, raise taxes and go big on job generation and infrastructure investment

Aashish P Somaiyaa

For our own good, I am hoping the budget is tough on us as consumers. Let me remind you of that popular adage–spare the stick and spoil the child or one of those Bollywood dialogues–bachpan mein sahi waqt par ek thappad lagaya hota, toh aaj yeh din na dekhna parta. Some ‘thappads’ have indeed come through in the form of fuel price hikes and the high interest rate regime maintained by the RBI; finally the impact is being felt too in auto sales numbers.

Thanks to the global financial crisis of 2008-09 and the loose fiscal policies followed since, the spending power has moved away from the government and in favour of consumers, leading to the government running up deficit. A prolonged consumption boom should eventually result in spurring corporate growth and economic expansion.

When the government has the spending power, it spends on building roads, ports, bridges and airports raising demand for investments – in capital goods, factories, cement and the like resulting in turn in corporate growth too; when the janta has the spending power, one expects them to consume more, resulting in inflationary trends, and that’s what we did. Inflationary trends are best curtailed by making it difficult to consume–so raise taxes and make it difficult borrow. So there you go, higher interest rates means less spending and more saving, higher excise and customs duties,

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