The Budget

Budget is a balancing exercise and it is always a tough call for a finance minister. The job becomes more difficult for a finance minister who is expected to please people who have different philosophies and mind sets. With the Indian economy going strong in the last few years our expectations have gone up. This makes the balancing act more difficult.

The finance minister has tried to do his best in the given circumstances. Though at micro level he could not satisfy every industry, he has kept the direction of the economy focused and there is no major change in the economic philosophy. Though there are no major liberalization provisions, there are no major surprises either. This neutrality in the budget with a positive feel has made the markets greet it well. As usual, the finance minister has done some good gestures for the consumers, which have generated a favourable reaction. The budget continues to feed the feel good factor. The additional levies are levied with a smiling face. Some provisions are unnecessarily harsh and not in the interest of the tax-payers. Retrospec-tive amendments are proposed to overcome the Judgments of the courts. Still, on the whole the budget has made people feel good.

The visit of the President of United States of America is an historical event for any country and his visit to India and his attitude towards India gave very positive signals. It seems that India has not only gained economically but even its political gains are significant. By inking nuclear deal with the president of the United States, the Prime Minister of India has achieved a great leverage for the future generation. The deal can end the nuclear isolation of India and it will give a major boost for nuclear power generation, which is a great need of India for sustaining the high growth rate over next few decades.

Energy is very important need of a growing economy. With the rise in the prices of petroleum products, energy is becoming expensive for most of the countries in the world. It can cause negative impact on the sustainability of the growth. Nuclear energy is a cleaner source of energy as compared to thermal and petroleum based energy generation and the world has a vast potential for the same. The United States of America is the pioneer of nuclear technology and it is a dominant player in the industry. Its support is a feather in the cap of our prime minister. India’s biggest import is of energy source being the petroleum products. As India needs substantial imports of the petroleum products, it gets dependent on other countries for its economic growth. Nuclear energy can do a lot of good to India and its dependence on petroleum import can come down to an extent.

The per capita availability and consumption of power in India is poor and it will need massive improvement if India wants to retain the speed of its growth. Nuclear power can at least partially solve the shortage of electricity, which is very important economic driver and to which, currently, the Indian economy is very vulnerable. Nuclear power used for peaceful purposes can make India an economic powerhouse in the next few decades.

Overall economic scene in India as well as across the world looks good. India may even withstand global slowdown, if it happens in the next few quarters. This puts India on a strong footing for the next couple of years. If monsoon remains reasonably favourable and unless there is an emergence of unwanted event creating global instability, India has a bright change to being one of the fastest growing economies of the world. The 8% GDP growth level is not only sustainable but it can touch the magic growth number of 10%. We not only need to wish good luck but keep up our contribution to growth of our country by producing wealth and steadily consuming goods and services without going beyond our means.

India has become very much conscious about the importance of infrastructure in the economic growth. The infrastructure such as roads, bridges, ports, dams, water supply, irrigation, housing, power, telecom, etc. has been given special impetus in the budget. For the last few years, infrastructure has become the buzzword of our government. It has become one of the fastest growing sectors and it has been successful in drawing lot of the attention of local and foreign investors.

For generating infrastructural growth, all kinds of engineering and engineers are very much in demand. It seems that the next decade is going to be of engineering sector and capital goods sector, which is a part thereof. The companies in these sectors will perform well. They will be substantial job generators. It will also have positive effect in other sector of economy. Now India need not only think of being service powerhouse. The production of goods for export can catch speed. If Indians can maintain quality, they will have their own segment and reputation in engineering supplies in the world market.

Without there being any major economic trigger in the budget for the stock markets, the markets have soured. No doubt that there is a boost given to infrastructural activities in the budget, but this was not unexpected. Just on the fact that there was no dampener in the budget, the stock markets have roared. I am bullish on the stocks over long and medium term but do not get surprised if minor correction sets in or the speed of growth of the stock prices slows down. The markets have grown quite fast on the back of not only good economic news but also on the back of global liquidity. Lot of Indian investors have sold their blue chip stocks considering that the things cannot be so good so fast for the economy and they are repenting. The FIIs who have pored in the money in the stock market are smiling all the way and pumping more money. There is a feeling of being left behind in the minds of lot of small investors and they want to get in the market at a reaction. Such reaction is not materializing for quite some months now. The liquidity is king but let it not rule your minds. Do not lose tract at the fundamentals. Do not invest brashly. Though the opportunities for growth very much exist, stocks are not cheap. Growth stories are still around and an investor needs to identify them.