Union Budget 2010-11 – No brake in momentum

Finance Minister, Mr. Pranab Mukherjee, managed to do the unexpected in the Budget. In what was largely being feared as an exercise that could have put some friction to the recovery that the Indian economy is currently witnessing, it actually turned out that the Finance Minister has managed to effectively conclude this exercise in a highly balanced fashion. This has left a lingering 'feel-good factor' in the minds of most segments of the society; be it corporates, individuals, economists, etc.

The markets have already given thumbs up to the Budget. What has aided market sentiments is the fact that the expectations had been quite low in the weeks prior to the Budget. Also, the apprehensions with respect to the extent of the stimulus withdrawal possible in the Budget had kept market participants shying away from investing. However, not only was the stimulus much gradual than anticipated, the FM has managed to please a large section of the economy without compromising on fiscal responsibilities, which was accepted well by the market. Thus, at the current juncture, one can safely conclude that there seems to be no brake on the momentum being witnessed in the economy as the FM has been calculative enough to initiate a move towards fiscal prudence without jeopardizing the country's growth prospects.

By, Hitesh Agrawal, Head – Research, Angel Broking

Union Budget 2010-11: Time for calculated moves

The Finance Ministry and Industry Associations have been buzzing with activity over the past few days. While the former has been busy formulating this year’s Budget, the latter have been engaged in preparing their wish list for the Budget apart from trying to justify the reasons for the continuation of the stimulus provided by the government to them last year.

However, the Finance Minister is once again at the crossroad. He has to choose between: 1) continuation of the stimulus measures provided to various sectors over the last one year (to weather the global crisis) and support growth or; 2) withdraw some of the stimulus keeping in view the high fiscal deficit situation in the country, especially considering the fact that the stimulus measures have done their bit in pulling the economy back up.

Notably, partial Stimulus rollback and fiscal prudence setting in are already reflecting in the current behaviour of the market participants. Thus, any significant deviation from the expected can lead to heightened volatility in markets. However, considering the limited options at hand for the FM in this Budget, it seems unlikely that he can deviate from the path visible. Thus, the FM’s moves are expected to be calculative so as to ensure that a move towards fiscal prudence is initiated without jeopardizing the country’s growth prospects.

By Mr. Hitesh Agrawal,Head – Research,Angel Broking