A Well- timed Budget?

  • SumoMe

With the Indian General Elections just a few weeks away and the end of the financial year approaching, Mr. Pranab Mukherjee, the Interim Finance Minister of India presented the budget for 2009-2010, which was considered by many as a very dry and flat budget.

 

Speaking of the expectations from the budget, with the current economic slowdown, a third stimulus package along with tax reforms seemed to be what the common man was interested in. The benefits of such reforms were also expected to reach the common man directly like lowering prices of daily use commodities. The masses also anticipated policies that could provide an assurance of some sort that job layoffs like those conducted by companies like Jet Airways would be carried out in a more planned manner.

 

Apart from these, I feel the budget clearly needed to address the issue of inflation, especially that of daily and general use commodities along with an equal focus on law, order and safety. The industry was also in need of some support which could be provided through excise duty cuts and stimulus to small enterprises.

 

The budget seems to have disappointed most. However, I feel that they did the best they could.

 

The budget seems to be a very farmer friendly budget and highlights the rural focus of the government. Loans worth Rs. 65,300 Crore have been waived for farmers and agricultural credit has increased three-fold. On the other hand, these waivers have weakened the State Bank of India. Rural Infrastructure has also received a boost in the form of policies for higher outlays through the Indira Awas Yojana and Rural Infrastructure Development Fund. Apart from providing assistance to millions of farmers in India, this will also help consumer companies especially FMCG makers. Also, the boost to infrastructure will indirectly help the cement, steel and construction industries.

 

The government has also provided support and benefits to various banks. Banks like Dena Bank, Bank of Maharashtra, Syndicate Bank, and Central Bank of India have already received packages worth Rs. 3,400 crore. I suppose that such packages will help strengthen PSU banks and help them compete with foreign banks and will also ensure that they are not restricted while expending loans.

 

The education sector has also been allotted a massive Rs. 13,100 crore. This will help companies like Educomp Solutions, Everonn Systems, though in a restricted way.

 

The Government seems to have responded to the security situation in the wake of the Mumbai terror attacks by allocating a massive Rs 1, 41,703 crore to the defense sector. This is bound to be great news for companies that provide goods and services to this sector such as BEML, MindTree, InfoTech Enterprises and many more.

 

The disappointing aspect in the budget for me was absolutely no alteration to tax rates. However, considering the economy as a whole, the market was disappointed and the Sensex fell by about 3%, increased funding of the government would have to be met through borrowings and the central and state deficits add up to almost 11% of GDP.

 

There seems to be too much hue and cry over the budget. It was way too hyped and there were too many expectations from it. It ought to be realized that these are tough times. The government reacted to the economic slowdown much earlier and provided two stimulus packages along with major infrastructure projects rather than wait for the budget to announce them. All in all, it was a good budget if not great.

 

Akanksha Tiwari

[Image source:http://www.piperreport.com/archives/images/Medicaid%20Budget%20Cuts.jpg]

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