Budget 2013: What do markets want?

The good news is that we are all part of this one cyclical counter-balance and one must behave counter-cyclically. When consumption comes down, that also reduces the subsidy burden for the government. When taxes are raised, that improves the fiscal situation of the government and curtails the need for it to borrow and eventually create room for RBI to reduce interest rates. The spending power moving to the government would eventually mean more investments in infrastructure and social sectors like health care and education.

So I pray the budget announces an end to the consumption cycle instead of prolonging the fag end of whatever is left now; and it creates the necessary conditions to spur the next big investment growth cycle. Let the government take away some more spending power from the consumer and create spending power for itself and corporate and institutions to be able to invest in capital projects, infrastructure and social sectors. Only if this happens will begin the next consumption cycle; a bigger and better one.

Consumers do not have to worry about deferred purchase of a car or a house or the inability to shop much. Incidentally, when you find it increasingly difficult to consume, is the best time to invest. That’s why 2005-2008 was the best time to make money in stocks, and 2009-2011 was the best time to consume when markets didn’t do much.

I expect the budget to continue to make it difficult to

... contd.