The great Indian budget and the Market

Posted July 7, 2009 - 10:36 by isohelpline

This year, and may be first time in last 18 years budget has not talked about divestment. Stock market always looks for some key terms in the budget (like Google search engine while indexing a site) and when it did not find its favourite term "divestment" or "dis-investment", it crashed.


You can not analyse a event based on how stock market has reacted to it. Stocks went up when UPA government was formed without Left support in a hope that how congress will be able to divest "Navaratna" companies (read profit making public sector companies) as there will not be any opposition from inside the government. They forgot to understand the basic principle of economy which even a common man will be able to understand that it is not the time when you will get right price for your stocks and hence you should not even think for divestment.

If you look inside the budget you will find sufficient indications regarding governments plan to dis-investment. It talks about 11K Cr. from dis-investment, though much less than 25K Cr stated in economic survey of India. To this prime minister of India clarified in an interview that economic survey of India is a far reaching document.

The budget relieved the Indian corporate from FBT (Fringe benefit Tax) and this is in no way a small gain. It not only reducing the burden of tax but also the burden of maintaining records and filling returns.

The benefit to individuals (men, women and senior citizens) in income tax is so small that it does not even take care inflation. There are some excise duty corrections but it will not effect the prices of those commodities much as part of the duties will be covered in the modvat taken by the industries.

Overall it is a growth oriented budget and after a long long time finance minister has given importance to rural India. The developments in rural India will also control migration of youth from rural to urban India.

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