BUDGET

Nirmala Takes Prove-me-Wrong Budget Gamble

Stock market pundits have always believed that if the market surges on Budget day, it will not be year for great returns. They have gone wrong only once in a blue moon. This budget could be one of those occasions.

For the economy to grow, two prime sectors should be confident: banks, from where the capital needs to reach the required; and the infrastructure sector.

The  Government is ready to borrow and also to dilute its ownership to raise money from its PSUs andits land bank. It is also keen to see that all this dilution takes place next year.

With worldwide interest rates lower or negative, it could be a good time to borrow abroad. The Centre is thinking about funding capital expansion rather than meeting revenue expenses.

Not only that. The  Government is allowing increased borrowing by states. They are looking for overall growth.

Infrastructure–primarily spending on roads– of close to Rs 2 lakh crore in election bound-states such as Tanil Nadu, West Bengal and Assam will help not only the Central Government, but also, the overall economy. We saw an example of this when BJP Prime Minister Aral Behari Vajpayee started the Golden Quadrilateral road project.

Allocation for the health sector and also agricultural sector will help cash flow in rural areas.  Since it is going to be a tax collections to meet Agriculture sector expense,  it will be easy and ready to spend. The  Government has  clarified that the levey of Rs 2.5 and Rs 4 on petrol and diesel will not increase price but actually help sustai inflation. However, with the banking sector being bullish, there could be an interest hike sooner than expected.

Overall it is a growth-oriented budget. We have to wait and watch if the government  implements what it promised. That would help the economy to grow and for investors in the equity market.