The Hindu Business Line : `Budget aims at balancing inflationary pressures'

BUDGET ASPECTS: Mr K. Annamalai, Chairman and Managing Director, Annamalai Capital Services Pvt Ltd, at a BL Club meeting at Bharathiar University in Coimbatore on Friday. — S. Siva Saravanan

Our Bureau

Coimbatore March 9 The Union Budget 2007-08 has sought to balance the inflationary pressures through a prudent fiscal management mechanism.

The lowering of peak duty rate from 12.5 per cent to 10 per cent has been initiated in the Budget as part of fiscal reforms aimed at cushioning the inflationary effects and sobering the prices of manufactured goods, Mr K. Annamalai, Managing Director, Annamalai Capital Services Pvt Ltd, Coimbatore, has said.

Participating at an interactive meeting with the students of Bharathiar University under the `Business Line' club here on Friday, Mr Annamalai said one of the direct impacts of high inflation was high interest rates that hurt investments in the form of high cost of borrowing, thereby adversely affecting the growth of economy.

Unlike earlier years when the perception of Union Budget leaned heavily on taxation side, the current Budget addressed the issues of fiscal management, inflation, tax structures and their impacts with a focused spending on agriculture and secondary education.

He felt with money supply going up by 21 per cent compared to previous year, containing inflation would be a worrying factor, though the GDP growth too remained impressive at nine per cent. Having adjusted the seven per cent inflation and the nine per cent growth, the gap of five per cent (excess money circulation) would be a factor to reckon with.

With the economy doing well consistently for the past three years, the country had begun to attract the global investors attention, thanks to its burgeoning domestic market, growing youth population and transparent economy.

With the economy poised to grow, the youth population would be in a position to see their income levels spiralling.

Will these youths spend their earnings prudently to get a better return on their investments? asked Mr Annamalai.

Invest in equity funds

It is time the young investors should look away from conventional investments such as fixed deposits or post-office saving instruments that, according to him, could no more bring an attractive returns, into new financial products such as equity/income/growth funds or equity/commodities derivatives. The opening of the `reverse mortgage' introduced in Budget is a financial product suitable for senior citizens and would prove to be yet another money management scheme for the investors, he added.

Mr P. Thirumalvazhavan, Registrar of Bharathiar University, earlier set the tone for the interactive session through an introductory remark on the transitional course the Budget has provided to facilitate the transformation of the economy from developing stage into a matured orbit.

Among those who chaired the session included Dr M. Manikkam, Dr Sudalaimuthu, faculties from Bharathiar University's Department of Commerce and Mr D. Rajkumar, Senior Regional Manager (Circulation), The Hindu, Coimbatore.