Dull, not dreadful

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: July 4th saw fireworks in a recession-hit America that is still contracting. But the Budget on July 6th was a damp squib in an India doing much better. Roger Federer turned in a more convincing performance at Wimbledon than the FM did in Delhi. The Budget had a lead balloon impact on stock markets and the investor community. Markets are not the best reflectors of an Economic Survey’s merits; nor of a Budget’s demerits. Still their movements in the first week of July suggested Survey-induced exuberance followed by overcorrection when the bubble was burst by an overly conservative, cautious, compromise Budget. It did not trigger much other than tedium and the disconcerting thought that this government may not deliver.

This year’s Survey was written by a team led by one of the finest minds in applied economics in India (contrary to public opinion some economic minds do apply themselves): Dr Arvind Virmani. It was informative, incisive, thoughtful, visionary and far-reaching; much bolder than is usual with North Block. Corporate and financial India took to its messages like ducks to water. It was manna from heaven. Perhaps they thought, not unreasonably, that the Survey affirmed the mandate that UPA II had been given.

Markets assumed UPA II understood that mandate, and would position itself to deliver on it. Having used the excuse repeatedly that its dependence on the Left had constrained UPA I from delivering on reform, it was not unreasonable for India to expect—with the Left having been voted into oblivion and the BJP (with some quite sensible economic proclivities) being humiliated—that UPA II would be unconstrained from proceeding with an urgent agenda of reform on several fronts at an accelerated pace. It assumed that the PM would want to secure his place in India’s history in what is likely to be his last term in office.