Pragmatism rules, kudos for politically shrewd Budget

The finance minister needs to be complimented for the pragmatism that he has shown and for presenting a politically shrewd budget.

Rightly, he has focused on enhancing the core of India's story consumption demand with focus on rural, health and education sectors. Measures like high rural spending, interest subvention for compliant farm loans, reduction in personal income tax surcharge, removal of FBTand CTT and no roll-back of CENVAT etc will leave enough in the hands of people thereby giving fillip to growth.

The FM has wisely avoided the temptation of giving a tax shock to the economy when he was hard-pressed to find resources as growth still needs careful nurturing.

On disinvestment, he has hinted that the Budget is not necessarily the only place to take such decisions and thus he has left it to the right people to take it forward. This would necessarily mean that the budget would get passed without much opposition. On reforms, we need to have a completely different view. Earlier we saw top down reforms and now the results of bottom-up stimulation have been very good and unexpected. The market was very unhappy with the debt waiver and National Rural Employment Guarantee Scheme (NREGS) last year and then the world melted and all these turned out to be absolutely brilliant. Here is a sensitive finance minister who has responded to a variety of suggestions on themes like anonymous donations to commodity transaction tax, to fringe benefit tax (FBT) and others. He found scope to raise resources by increasing the MAT (minimum alternate tax) from 10 to 15 % while increasing the period of taking credit for the same from seven to 10 years. After all, MAT is a mere advance tax and is now roughly half of marginal tax rate.

If the government comes out with a practical farmer level fertilizer subsidy programme in a few months, as promised, it will be a great breakthrough in the subsidy regime. This Budget will benefit large sections of our society, including small and marginal farmers, the middle class and corporates. The government has touched upon effective targeting and monitoring of the social and infra spends. Implementation of this intention will be one of the key things to look out for and could bring a big change in the way we perceive governance in India.

As far as the market is concerned, it had built up too many expectations and the Economic Survey raised them further. I have no doubt that it will bounce back, subject to the huge amount of paper that keeps pouring and diverting money away from the market and therefore it will go back to a stock picker's market and to a consolidation phase.