With the economy was facing multiple challenges on both growth and inflation, the market was looking forward to this year’s Budget. Concerted policy action since September 2012 built hopes of a big bang budget.

However, the Budget was rooted in reality with a strong orientation to fiscal responsibility.

While the market may sulk in the near term, it would realise the importance of a prudent fiscal policy over the course of the year.

Subsidy measures

Plan expenditure has been normalised over last year’s budget estimates, while the subsidies have been thoughtfully provided.

Petroleum subsidies, which shot to Rs 96,000 crore, against budget estimates of 43,000 crore at the beginning of the year have been rationalised to 65,000 crore with the promised action of capping LPG cylinders to 9 and increasing diesel prices by 50 paisa per litre per month. Food subsidy has been provided keeping in mind the incremental allocations towards the Food Security Bill.

Rural thrust is evident in the Budget with a 46 per cent increase in allocation to rural development and a 22 per cent hike for the Agriculture Ministry.

No big bang

Growth is likely to gradually improve during the course of the year on the back of a combination of monetary and fiscal measures against the backdrop of declining inflation.

The Budget stayed away from stoking growth in the form of any direct policy interventions but the focus seems to be on creating conducive conditions in the form of lower deficits.

While the market was a tad disappointing due to lack of any big bang policy announcements and some minor irritants in the form of CTT, and an increase in surcharge for the corporates, it will be back to tracking the growth trajectory of the economy in the face of the belt-tightening by the government.

While the market may sulk in the near term, it would realise the importance of a prudent fiscal policy.