The government has taken non-populist measures in last 3-4 months which
includes railway fare hike, diesel price increase and cut down in
subsidy on LPG. Therefore, the government is determined that reforms
cannot be ignored. India's credit rating was threatened and things have
gone out of control. A responsible budget is likely because the
government has been taking responsible steps in the last 3 months after 3
years of inaction.
Therefore, I am quite hopeful that the budget may be much more responsible. This year's fiscal deficit will be likely at 5.3%. More importantly, we have to see how realistic revenue and cost assumptions are. That is what foreign investors will look at whether they are realistic enough or they are just making things look the way it should be.
Q-What exactly should the Finance minister prioritise - inflation or growth?
Ans- At this point of time, it should be growth. The Finance minister has to get RBI into confidence because we cannot have a chariot with two wheels moving in different directions. It would not solve us any purpose - neither growth nor inflation. However, growth is the key requirement because RBI numbers and the data which is given out do not track employment numbers, which is very important for our country. When inflation is driven more by supply side constraints than items like food and fuel, if we do not focus on growth, things can become very bad.
Q: Do you expect a post budget rally?
Ans: It is very difficult to comment on that. A pre-budget rally is possible because the Finance minister believes that we need a vibrant stock market for improving sentiment, disinvestment or getting our current account deficit under control through flow of capital. Therefore, once he is committed then the odds are in favour.
Q: What can really spook the markets?
Ans: The first factor is the tax of dividend. This is because there is a temptation for people eho thinks that the dividend go to super rich. However, it is tax paid profit. More importantly, most of the promoters get the larger dividend. When we increase it, there will be a tendency not to give dividend but the other ways to sell shares and buy it in preferential.
This will impact smaller shareholders because decision takers are the large shareholders who have larger chunk of dividend. There are certain pressures which can come from various political quarters and if it happens in budget, the market will become fragile. There will be no buyers in the market and it will fall like a pack of
Therefore, I am quite hopeful that the budget may be much more responsible. This year's fiscal deficit will be likely at 5.3%. More importantly, we have to see how realistic revenue and cost assumptions are. That is what foreign investors will look at whether they are realistic enough or they are just making things look the way it should be.
Q-What exactly should the Finance minister prioritise - inflation or growth?
Ans- At this point of time, it should be growth. The Finance minister has to get RBI into confidence because we cannot have a chariot with two wheels moving in different directions. It would not solve us any purpose - neither growth nor inflation. However, growth is the key requirement because RBI numbers and the data which is given out do not track employment numbers, which is very important for our country. When inflation is driven more by supply side constraints than items like food and fuel, if we do not focus on growth, things can become very bad.
Q: Do you expect a post budget rally?
Ans: It is very difficult to comment on that. A pre-budget rally is possible because the Finance minister believes that we need a vibrant stock market for improving sentiment, disinvestment or getting our current account deficit under control through flow of capital. Therefore, once he is committed then the odds are in favour.
Q: What can really spook the markets?
Ans: The first factor is the tax of dividend. This is because there is a temptation for people eho thinks that the dividend go to super rich. However, it is tax paid profit. More importantly, most of the promoters get the larger dividend. When we increase it, there will be a tendency not to give dividend but the other ways to sell shares and buy it in preferential.
This will impact smaller shareholders because decision takers are the large shareholders who have larger chunk of dividend. There are certain pressures which can come from various political quarters and if it happens in budget, the market will become fragile. There will be no buyers in the market and it will fall like a pack of
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