Column : Found, but only after translation

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: Obfuscating official language is something we have all got used to. Typically such language is not intentional but just a matter of habit that keeps the public guessing. Such guessing games were not consequential when market participants were few belonging to the same boys club. But things have changed. Today these guessing games can end dangerously. Yesterday’s market mayhem of a drop of nearly 900 points was such an example. A completely avoidable event brought on by a Budget that neither elaborated its intentions and implications nor spoke plainly. True, the market was expecting everything from this Budget, including perhaps world peace, but there was little in the Budget that warranted this outsized reaction. Instead, poor management of market expectations and shoddily communicated messages turned a reasonably well constructed Budget (under the circumstances) into pushing the market into a tail spin.

Let’s begin with the numbers. We had expected a deficit of 6.6 percent of GDP, so the announced target of 6.8 percent was not surprising, especially since it was entirely on account of divestment. We had assumed around Rs 15,000 crore, while the budget had virtually nothing. Ministry officials spent the better part of yesterday’s afternoon trying to explain why even though the President’s speech, the Economic Survey, and the Budget itself had clearly stated the government’s intention to divest up to 49% of its holdings in listed public sector companies and even undertake IPOs, the Budget contained no target or estimate for divestment.

The government plans to use around Rs 33,000 crore from the previously issued MSS bonds in financing this year’s budget, which it is accounting as market borrowing. That’s the right thing to do.

But including this number in the overall net borrowing number without alerting the reader gives the impression that all of the announced Rs 390,000 crore borrowing will be done anew. The MSS funds had been raised two years ago! Excluding the MSS and any reasonable assumption about divestment would put the net borrowing number closer to Rs 350,000 crore without changing the fiscal deficit target. The market reaction to this number would have been far less vicious.