to raise indirect taxes for competing products or competitors. Similarly making imports cheaper was a tactic often used to kill competition.
Speculation as to which group or industries would benefit offered huge opportunities for investors to trade in a stock or group of stocks.
In the late 1990s, with the alignment of indirect taxes into a few simple rates as opposed to the myriad different rate slabs we had earlier and reforms to reduce the cascading affect of taxes on raw materials, the chances of speculating have reduced. The budget therefore was an important financial event to look forward to in the past but has become less important in today’s environment. However, the budget continues to be important from a nation building point of view.
If discounted cash flows was the method used to value companies, then minor changes made to some taxes may have little impact on the valuation of the company. This budget would be a dream budget, if it just addresses the following:
(i) Increase the spend on education significantly
(ii) Broaden the tax base and improve the quality of the public expenditure- This should help in controlling the fiscal deficit.
While recognising that fiscal deficit needs to be controlled, we cannot wish it away. It may do wonders for the long run if the government revives investments with a cleaner, non-corrupt environment and improves the efficacy of public expenditures and take steps to reduce the incidence of generating black money.
However this being the last budget before the next elections, I do not expect it to be very reform oriented despite the indications given by the FM. On the other hand it will be a good budget, if it controls the urge to increase populist spending and further affect the fiscal deficits.
I do not expect the fiscal deficit to come down significantly and do expect that it may be relatively high given the need to support large sections of the population. I would view the increased spend on National Rural Employment Guarantee Act (NREGA) as a positive sign, although I recognise that its delivery