Expert Zone
Straight from the Specialists
The stock market’s delayed response to Budget 2013
(Any opinions expressed here are those of the author and not of Reuters)
Finance Minister P. Chidambaram tried to humour the market in his budget by cutting the Securities Transaction Tax (STT) which had been one of its sore points. But the market was not amused. The Sensex continued to slide, indifferent to the budget which was presented with a lot of expectations.
This appears to be rather strange because the budget was well received by the industry, in spite of the increase in surcharge from 5 to 10 percent. It was possibly the realization that the finance minister lived up to his promise of cutting fiscal deficit to 4.8 percent which created an infectious confidence in growth revival.
Chidambaram could have hardly done anything more, considering there were economic and political compulsions he could not ignore. No big bang was possible and no big tax mobilization was undertaken.
The reduction in fiscal deficit was a good reason for the market to have responded positively to the budget. Because it would start a chain of events that could see the industry recover from a stalemate. First, the additional borrowing by the government in 2013/14 would be small and would not crowd out the financial market. Second, the Reserve Bank of India (RBI) has been harping on a reduction in fiscal deficit as a precursor to cut interest rates.
Budget 2013: Balancing fiscal prudence and populism
(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Reuters) With a four-month equity rally showing signs of fatigue, the focus is on Budget 2013 to provide further impetus.
Budget 2013: Chidambaram’s chance to bell the cat
(Any opinions expressed here are those of the author and not of Reuters)
This year’s budget will be an interesting one and it will hopefully be more pragmatic than populist.
Not much has changed since Pranab Mukherjee presented the budget in 2012. At the time, India was battling high inflation at 9 percent, fiscal deficit at 5.9 percent of GDP and a current account deficit (CAD) at 4.2 percent of GDP.
Budget 2013: India has no room for a populist budget
(Any opinions expressed here are those of the author and not of Reuters)
It is still a good year into the next general elections, yet India’s two main political parties have already set the stage for a showdown. The opposition Bharatiya Janata Party is closing in on the Congress party, according to opinion polls. Even though it is still early days, this puts even more pressure on the ruling party.
Last autumn, the Congress had a change of heart with its policy priorities, having realized that dithering on industry reforms would be a safer way of losing votes than pushing ahead with unpopular measures. It ploughed through opposition to liberalize foreign direct investment, and it mainly succeeded, although progress on fiscal housekeeping, such as raising power tariffs and cutting diesel subsidies, has come at a much slower pace. Other potential measures did not happen at all. Nonetheless, the party has raised hopes and expectations that it can get India’s act together.
Budget 2013: Getting the wow factor back
(Any opinions expressed here are those of the author and are not of Reuters)
Gone are the days when Indians used to wait for the budget in February to buy new things. In the 1990s, capital market investors also waited with bated breath for the annual budget to spell out tax and policy measures that affected the fortunes of sectors and companies.
But over the years, the budget lost its wow factor, becoming more of a ritual presentation of the government’s finances, resource allocation, fundraising and spending. This is because most taxes have been rationalized (although some scope still exists) by successive governments and different ministries announce various policy measures throughout the year.
Budget 2013: Need to review tax incentives
(Any opinions expressed here are those of the author and not those of Reuters)
It’s going to be a tight budget this year and Finance Minister P. Chidambaram will be looking to save every rupee in revenue to reduce the budget deficit, to which he has committed. One option would be to withdraw tax incentives which have outlived their purpose.
The finance ministry is only too aware of revenue lost from tax incentives. In 2011/12, it was a loss of 5.29 trillion rupees. If tax incentives are withdrawn, the 2013/14 budget would be in surplus. Nothing would amuse the finance minister more.
Budget 2013 should trim expenditure
(Any opinions expressed here are those of the author, and not necessarily of Reuters)
Finance Minister P. Chidambaram is only too aware of the damage done by the last budget and has to an extent repaired it to unleash investment. The next budget should confirm his commitment to growth.
China defence spending rises as U.S. budget declines
(The views expressed in this column are the author’s own and do not represent those of Reuters)
As China prepares for the final plenum of the 17th Party Congress, it has announced that the new defence budget would amount to 670 billion RMB (approximately $106 billion), which equates to a 11.2 percent increase. This is in sharp contrast to the United States, which, despite a so-called “pivot to Asia,” is busily reducing its defence budget.
Sensex on the bounce
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The year 2012 has begun well for the stock market. In just six weeks, the Sensex was up 13 percent which made up more than a half of the fall in the previous 52 weeks. Will this trend survive the rest of the year?
