Predictability with added stability makes the difference

Updated: Mar 1 2006, 05:34am hrs
The budget, the market feels, is a non event. I think it is good as it maintains stability and predictability. It furthers the articulated policies of the government and allocates resources sensibly to required priority areas. It supports critical initiatives for social and economic development of the country, such as rural, education, connectivity and health, infrastructure and poverty reduction by providing resources. No new programmes were announced. Personally I think this is a good trend that the budget remains just that and not a platform for policy articulation. In fact in a coalition government, the finance minister has to perform within much greater constraints. I think the markets will be better served to expect only financial content in the budget and not get disappointed with missing policy candies for the stock market.

Specific proposals to lower indirect taxes and leave the direct taxes alone should help markets with lower product prices and the economy grow with low impact on inflation.

The lower deficit levels will also allow greater manoeuvrability to the government to support building greater social and economic infrastructure. Continued emphasis on infrastructure development is an imperative, as this is a seriously unfinished agenda.

Good intentions to create a more enabling environment for the bond market and more liberal allowance for investment in global markets are welcome news for capital markets as a whole.

Industries that have a good ability to benefit larger sections of the population including employment, economic growth, foreign exchange earnings and utilise home labour skills, such as textiles, food processing and tourism have been singled out for favourable support.

The writer is MD & CEO, CRISIL