While the measures announced in the Budget show that the finance minister (FM) is open to suggestions -- he removed commodity transaction tax (CTT), fringe benefit tax (FBT) and so on -- this annual exercise has failed to reveal the boldness that was expected. Recent statements from government functionaries had raised hopes that the Budget would spell out a road map and not just be a balance sheet. This has not happened. For instance, there is a proposal for raising Rs 1,100 crore through disinvestment but this does not indicate the potential.
If one was expecting an economic stimulus, the Budget does provide that. There are measures to ensure expansion of the National Rural Employment Guarantee Scheme (NREGS) and give more benefits to farmers. Impact of these stimulus measures will be undone as higher borrowings are expected to put pressure on interest rates. The government should try to curtail borrowings, which will be possible if alternative sources of funds such as disinvestment programmes are implemented properly.
The FM, however, has shown that he is sensitive to reforms, though the language he has used is different. The disinvestment plan is understated but surely many more actions can be expected in the days to come.
The stock market had discounted many more things and hence it reacted negatively today. But it will certainly start taking note of the positive side of the Budget soon.
