Hi
FM can not present a Please All Budget.
His Budget 2008-09 , being the last budget before UPA goes for elections, certain decisions were not taken. It is quite obvious that
disinvestment is not the main agenda which has enthused market in past few years , being the policy statement meant for private or corporate sector.
Other than that Budget contains many long term thinking even though they may seem populist.One needs to see that in perspective.
If India has to achieve higher growth rate then it is Agriculture sector which needs to be boosted. Manufacturing and Service sectors have already recorded phenomenal growth. But Agri Sector is weighing down the Growth rate.It is a shame on any Govt that farmers commit suicide, are unable to earn decent livelihood, because of mariyad factors including lack of access to easy credit and easy input. Industries and private sectors have always enjoyed extremely good support from Banking Community, where as small and marginal farmers or even big farmers are never got that type of access. One of the reason being default rate of loan repayment. Crop insurance scheme is put in place only last year. These people need small amount of money to meet their daily obligations and need also, since crops would be sold only on some occasion and they can not store it for long term to get better price(middlemen can do that).
Credit card facility is not easily available to them. Hence they fall in debt trap easily.Now with main hurdle removed , I am sure Banks would respond to the gesture and Agri sector would get the desired impetus.
One would shudder to know the extent of default rate/NPA /vanishing companies and the amount of money actually locked up and unrecoverable in private sector. This 60,000 cr. is nothing but a pittance by that comparison. None should grudge it.
Now what we need is to provide farmers with irrigation , agri inputs, bring more land under cultivation and bring more states under green revolution concept.Also one should not divert agri land for SEZ purposes. This should not be allowed. However that is another issue.
Indian economy is very less dependent on exports. What support Govt has provided, has not yielded enough result. One can debate the shortcomings but then fact remains that exporters may be highly visible but their contribution is only marginal. unless this grows to some recordable figure in terms of GDP ratio, the situation will not improve much for them. They might keep getting some sops here and there but as such they will be on the fringes of Radar screen.
This budget has gone one step towards rationalization of various duties.this continuing trend is a positive sign and I am sure Govt would be able to meet the target of 2010/2011 for GST.
This is industry friendly steps should be welcomed.
Although ,on income tax front slab rates have been adjusted and may seem very good, but with inflation and growing salaries, it may prove to be very neutral step and a much needed one.This may also not provide much relief to tax payers.
The Income tax collections have grown up and BE for 2008-09 is 3.67 lakh crore rupees.With Industrial progress I am sure it is going to outstrip the target by not less than 40,000 crs.PAN is being adopted widely and so tax base would only increase. Good thing is that BCTT is withdrawn as it had put extra burden on Banks to collect and provide information.But with increase use of internet there may not be need of this in future(RTGS is becoming operational for all banks). More disposable income means more spending and more savings. Rate of capital formation, savings and spending are still healthy.
Health and education are getting enhanced allocation, which is a good sign for Long term.
As for Market, if there is nothing much to cheer then there is not much of negatives.One must feel grateful to have escaped the wrath of FM's legendary imagination and propensity to impose innovative taxes.The
whole exercise is market neutral but friendly on fundamentals and market will reflect is due course.
Next year being election year it would be difficult to predict the market, yet one could be reasonably say that it would end higher than the peak achieved so far, may be 25000 or 26000.
Certain long term policy statements and Projects would bear fruit and keep India on growth trajectory.
Power sector will be getting tremendous attention in coming years.Reliance Power is getting the beating now for high premium but then the same investors would get into this on return of positive sentiments. It has got derated for its high premium on IPO its future is quite bright if you want to be in power sector. REL,NTPC and RPower are good to be in for next five years.
Rail infrastructure will get boost with freight corridor and dedicated lines for goods train.Companies involved in Railways related aspects would do well such as Taxmaco.( I am not in any of these as I am fully invested at these levels, and yes if I get surplus I would love to do so). Capital Goods, especially power related would do well.I am quite positive on Areva , alstom, ABB and Siemans.I have first two.
Telecom sector would continue to be a growth sector as there is a lot that needs to be covered and all companies would do well. AIRTEL and Reliance Infocomm would be my favs, in that order.This sector is untouched by me as yet for same reason.
All said and done one needs to see how long term statements get translated into reality in coming years as one can not expect results of these initiatives in one years. Private sectors would become more courageous to venture into Agri Business after loan waiver and I am sure small and medium farmers would be benefited. One needs to watch such companies which might constitute growth sector stocks later.
Often there is a gap between policy and its execution. We are very week in this aspect and this is where China scores over us. If we are going to bridge this gap then our economy will be on upswing for at least next 20-30 years.
Current bearish trend is much needed to restore the sanity in the market and also Bears need to earn something to continue living till ultimate bear market dawns upon India.After all economy has to provide for all
.
Pankaj
