The Hindu Business Line : Nothing path-breaking

The market, which had reacted positively when the new government was elected, has voted negatively on the budget presentation. Following the election of a strong and stable government, the market had expected a number of path-breaking measures, which failed to materialise.

The Finance Minister’s effort to revive the economy back to 9 per cent GDP growth is a step in the right direction.

The Government’s focus on infrastructure and rural development has been retained with increased allocations towards programmes under the National Rural Employment Guarantee Act, Bharat Nirman, Indira Awas Yojana, and the National Rural Health Mission.

The enhanced focus on higher education and the effort to modernise employment exchanges are commendable. I am also happy that fringe benefit tax and commodities transaction tax have been abolished, and that the goods and services tax is likely to come into effect from April 1, 2010.

I am, however, a little unhappy about the hike in MAT rate from 10 per cent to 15 per cent. I am also disappointed that the securities transaction tax (STT) and dividend distribution tax (DTT) did not catch the Finance Minister’s attention. I had expected high-decibel announcements on restructuring/divestment/privatisation of State-owned enterprises and opening up of more sectors for foreign investments.

The much anticipated increase in the FDI/FII limit in insurance and retail did not feature too.

Prices of commodities such as oil, food grains and fertilisers have been regulated for too long; there is little choice but to allow a gradual shift towards market prices.

While the Finance Minister did mention the need to look at oil prices, and announced that an expert committee would be set up to advise on a viable and sustainable pricing system for imported petroleum products, I had expected much bolder steps.

Also, there were no measures to ensure effective targeting of government subsidies to the really needy.

The proposed fiscal deficit of 6.8 per cent for 2009-10 is too high and I am concerned about the slippage in fiscal discipline. Adhering to the fiscal responsibility and budget management (FRBM) targets is critical. High fiscal and revenue deficit might result in a downgrade of the country rating.

Although the stock market has corrected sharply, I feel that it will stabilise and look forward to other things like quarterly numbers, monsoon and other Government announcements. I remain optimistic about the economy as well as the markets.

(The author is CMD, Motilal Oswal Financial Services.