Nirmala’s booster shot could have come earlier

The Indian equity markets, bruised and battered after Budget 2019, skyrocketed last Friday after Finance Minister Nirmala Sitharaman announced a slew or tax reliefs and rollbacks. Unlike the last couple of Fridays, when her relief announcements came after market hours, and lost their fizz by Monday morning, this time she struck in the forenoon of a dull trading day, where the indices slipped into red.

But as she slashed effective corporate tax to 25.17 per cent for domestic companies, and announced other tax cuts, the Sensex started waltzing up, ending the day around 1,900 points up; the biggest single day rise in 10 years.

Incidentally, the biggest ever rally of the Sensex was on May 18, 2009, when the UPA returned to power with Congress winning over 200 seats, against expectations of a hung Parliament. This was the same market that tanked at the news of the BJP-led NDA’s defeat on May 17, 2004, to close at 4,505.

Bonanza vs fiscal deficit

The latest relief measures announced by the Finance Minister, to be effective from April 1, 2019, were the Modi government’s response to shrinking growth for five successive quarters, coming to a disappointing 5 per cent in the last one. The dismal economic scenario triggered doubts, sarcastic puns and memes on social media on “Nirmala Tai” making India a $5 trillion economy.

Sitharaman said the cuts would make our corporate tax rates the lowest in South Asia and South-East Asia, and the markets cheered lustily. But the fact remains that these measure will let go annually a huge tax kitty of ₹1.45 lakh crore.

All that the Finance Minister would say on how she would tackle the fiscal deficit caused by these measures was a terse comment on the government being conscious of the reality and would deal with it.

Proving the adage “damned if I do and damned if I don’t”, the FM attracted another round of jokes on how you can trust a woman to blow up large sums of money.

This time “the RBI gave her ₹1.75 lakh crore, of which she spent ₹1.45 lakh crore in a month!” But serious questions are being asked on why Sitharaman had to wait so long to react to the bloodbath in the equity market triggered by the harsh Budget proposals. It is estimated that foreign funds have dumped over $4.9 billion worth of stocks since June. How thousands of small and medium domestic investors were butchered in this exodus can be seen on the message boards of popular stock market sites such as moneycontrol.com .

Both the government and the companies whose share prices have plummeted are cursed here. A witty one was “Nirmala ke maiden Budget ne sab ko dhula diya, who bhi ptatak patak ke,” the pun being on Nirma soap!

As corporates, particularly auto majors, continued to bleed by the steep fall in demand for vehicles, and blamed it on the stuttering economy, a WhatsApp message caught my attention by its bitter truth and desperation. Originating from a farmers’ group, it posed a query which can be paraphrased thus: “If a ₹10 lakh car is not selling, then, sell it for ₹2 lakh. Why close the company or production? Don’t we sell ₹20 a kg onions at ₹2, and ₹7,000 a tonne cotton for ₹4,000 a tonne? Do we stop farming?”

I tweeted this, tagging two auto majors, who I am sure, were not amused, and was really surprised to see it going viral, with over 5,300 likes and 2,200 re-tweets and scores of replies. Of course the statement does not make economic sense, as some smart alecs pointed out! That onions and cars are not comparable is a given but the message forcefully conveyed the angst and pain of the farming community.

I am sure that the original composer of that message and the farming community are now looking up to the Modi government to come out with a big-bang announcement on agriculture as well. No prizes for guessing that our equity market will only frown on such announcements and “subsidies”. For, after all, how many onion or cotton-growing companies exist or are listed on our bourses? So why would farming or farmers matter to our stock market investors?

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