Most of the analysts are of the view that in spite of the rising fiscal deficit, Pranab has made an attempt to provide steady monetary assistance to the social sector, thus by broadening its agenda for inclusive development. Most importantly, the proposals for big-ticket divestments were deferred signalling that it could be well done at a better time later. The finance minister had said in his speech, Members would appreciate that a single Budget speech cannot solve all our problems, nor is the Budget the only instrument to do so. He was all for the tinkering first, which may lead to creating elbow-space for greater flexibility; when he finally settles down for that big move.
Though there was a clear disappointment over the point that the government could have opted for raising funds through disinvestment route, especially considering the appetite for Indian paper, there were still some positives to take away home, said Angel Broking in its review of the Budget. Market expectations were of a disinvestment target of about Rs 20,000 crore, which would have helped in alleviating the pressure on government finances.
Crisil Research, in its Budget analysis, said that though the speech had very little sense of occasion, the nitty-gritties were clearly the focus of this years budget exercise and the fiscal numbers clearly indicate that the finance minister simply did not want to take any chances. For example, the estimated increase in tax revenues is a mere 1.8% over the revised estimates for 2008-09, a far cry from the high buoyancy of just a couple of years ago.
Sharekhan, a prominent broking firm, said the street had reacted negatively to issues such as high projected fiscal deficit of 6.8%, no mention of reforms in petroleum and insurance sectors, and absence of focus on aggressively pushing ahead the divestment programme. On the positive side, the finance minister announced specific measures to enhance investment in infrastructure and boost domestic consumption through lower tax burden (higher standard deduction, withdrawal of surcharge and education cess). Overall, the focus continues to remain on stimulating economic growth in spite of further deterioration on fiscal front.
According to Angel Broking the budget ensured that the aam aadmi was not overlooked. Focus on agriculture, rebate for farmers paying loan on time, Rs 3 lakh loan for farmers at 7% per annum, a 144% higher outlay towards National Rural Employment Guarantee Scheme (NREGA) and food security are all measures aimed at rural India. For the urban consumers, the Budget reduced the 10% surcharge on personal income tax, abolished the FBT, increased the tax exemption limit by Rs10,000 (women and others) and Rs15,000 (senior citizens). These measures would increase the disposable income in the hands of the consumers, which in turn would encourage greater spending, if the economy is to revive back to the 8-9% growth trajectory.
We believe that the markets response to the Budget was more in the nature of a knee-jerk reaction as it adjusted to the ground realities. However, we believe that the government will continue its efforts outside the Budget, as indicated in the FMs speech. Keeping this in mind and considering that the stimulus packages and low interest rates will help unleash the huge latent domestic demand in India going forward, we remain positive on the Indian stockmarkets, said Angels review note.
In spite of the rising fiscal deficit, monetary assistance to social sector attempted
Big-ticket divestment proposals deferred for a better time in the future
Measures to enhance investment in infrastructure and domestic consumption
Markets response to Budget was more in the nature of a knee-jerk reaction