How to rate the budget?

February 26, 2010

INDIA-BUDGET/When the finance minister presents the budget, the stock market moves one way or the other.

And like every year this will dominate the news.

Over there and everywhere.

Is that fair? Or convincing?

Some of the analysis will follow a pattern.

If the stock market goes up, the budget may be described as successful because it didn’t “rock the boat”.

If  it moves sideways, it may be said the market had already absorbed the good news — the growth figures for instance.

If it moves down — the fiscal deficit may be the reason.

If the finance minister withdraws the stimulus it may not be good (for some) because it may mean more taxes and hence less profit.

Bad for the markets. Bad marks for the budget?

But if the stimulus is withdrawn, more taxes mean more revenue and less fiscal deficit. Which means less government borrowing, which means more scope for private borrowing and private investment.

Good for the market. Good marks for the budget?INDIA-BUDGET/

So is it possible to sum up the market’s two or three or more views on the above in a single Sensex measure?

And on a single day’s trade or a week’s trade or a month’s trade?

A budget is the “annual financial statement” put before the parliament by the government.

We know how much the budget realised, what it said it would do, only at the end of its life — the fiscal year.

Can we withhold our judgement till then?

The advantage may be that the stock market would have moved so many times by then that the budget can be analysed for a thousand other equally important things.

Like budget funding for more courts and hence quicker delivery of justice would mean lesser backlog of property suits and therefore more economic freedom.

If the proof of the pudding lies in its eating, then how about a full panel discussion on the previous year’s budget instead of focussing on the new one?

One comment

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To rate a budget based on stock market response is totally incorrect. In my opinion stock market is only an indication of how much money people are willing to play with! Now we have phrases like “inclusive” etc, why? When there is no more need for such phrases, that may be a time when stock market can be studied: At that time most of the people may be investing in it. Not now.

When a common man is not having enough moeny for his day to day living, taking stock market as a reference only shows how much of ignorance prevails within the higher class and ruling class of people.

Posted by ssmani | Report as abusive