It is a sixer … all the way
Ajay Mahajan
Thursday, March 06, 2008
(Mumbai)
The Union Budget for 2008-2009 is a powerful stroke by the Finance Minister in the midst of difficult global economic conditions that have raised the spectre of seriously impacting Indian growth. Most of the world is facing slower growth with strong inflationary expectations, and India is likely to be no different.
Against this backdrop, the FM has provided strong fiscal stimulus to the rural economy and put more money in the hands of the common man, both in rural and urban India. This will do well to stoke domestic demand.
As for markets, we believe the budget is marginally positive despite the increase in short term capital gains tax to 15 per cent. Corporate debt markets have been given the necessary impetus; implementation, hopefully, will follow.
Pronouncements relating to introduction of exchange traded bond, currency and interest rate derivatives will surely help increase broad-based awareness and transparency. The bond markets have every reason to cheer.
The debt markets are surely relieved with the continued commitment to FRBM, fiscal deficit at 2.5 per cent and a net borrowing of only Rs 100,000 crore, way below market’s expectations.
There is no gain saying the fact that there have been populist measures announced, including the write-off of farmers’ loans. However, there is a silver lining there for the banking system that will possibly get to clean up their balance sheets and look even healthier, going forward.