Budget Effect

Hi Guys! It has been quite a while since I spent time on my blog. I was busy with the regular quarter-ending work load. With many companies announcing earnings and fund managers sending in their performance reports, appraisals and valuations are keeping me very busy these days

I went through the Indian Budget and must appreciate the aggressive step taken by the FM. He has gambled by increasing the deficit. The steps that he has announced, subject to implementation, are all positive and is likely to fuel the economy. Only time will certify the quality of this budget. I personally think it is a good budget with a long-term vision.

However there are few areas where I have some concern. My primary concern is to know from where are we going to get the funding to spend on all the listed expenditures. The other area of equal concern is the Interest Rates. The banks will be tempted in retaining the same lending rates or even levy higher rates. This will not help the growth in the anticipated speed and manner. Another unaddressed issue is the control of deficit. How the deficit is going to be gradually covered is still a mystery and needs some explanation and probably a plan from the FM.

When, we, as an individual take a loan, we make sure we can pay before our lifetime and do not want to pass it on to our children. When it comes to governments, there is no such restrain. Every Government leaves behind a legacy of growth and debts. I am yet to see a government that is focused in reducing the deficit. Surely, these are extraordinary times and extraordinary times demand extraordinary steps and solutions. If the Government of India does not have a road map to reduce the deficit, every year will bring about extraordinary situations, in one form or another.

The farmers were Bailed out. This could soon be a regular allocation. No government wants to lose this vote bank. The Rain either betrays or plays havoc with the farmers. So such things are bound to happen on a regular basis especially with Global Warming.

The present fiscal deficit of 6.8% of GDP is very low than what might actually transpire in the end. If we add the state-level deficits the final figure would be more than 10% and I wouldn’t be surprised if it even doubles to 13.6% of GDP, especially with many States subsidizing commodities, issuing sops/gifts and some even busy building Statues.

We the people, should keep alive the debate, if it exists or kick start a debate on how we can achieve a zero percent deficit. We need to stipulate a reasonable time frame for it and start debating on ways and means to eradicate deficit in government spending. Such debates would force the government to come up with a road map for this. After all, we don’t want our children to inherit our borrowings.

Every government announces plans and schemes and allocates Billions of tax-payers money. How far does it reach the intended target is still a worrisome issue? With India boosting its technological expertise in the global arena, why can’t technology be used to monitor the progress, usage and performance of the various schemes and plans announced by successive governments? Money spent on the Indian IT Companies to design and develop a control mechanism is worth it rather than wasting the money in numerous schemes where only a small percentage reaches the intended beneficiary.

The success of the Indian economic turnaround or even the Global economic turnaround, for that matter, from these levels, totally depends on the Global lenders. The lenders probably have more choices now than ever with almost all countries requiring funds to fuel their economy. It is not just the emerging or frontier markets that needs funding. The developed markets needs them as well.

INDIA has been a great growth story and I am sure she will attract lenders to fund her growth.

Disclaimer: All information and views posted by me in the blog are solely my views and opinions and do not necessarily reflect the truth or the real situation. The material and information contained on this post is provided for pleasure reading only. You are requested to consult your Financial Advisers before making any Investment related decisions. I do not recommend or suggest any investment decisions for any of the readers of this blog. I therefore do not accept liability for any loss one might incur, by taking decisions based on my posts.