The sincerity with which the Modi government is going about with its work until now is really appreciable. First, they went on to hike petrol and diesel prices, followed it up with the rail fare hike, then came in the very conservative Railway Budget and finally the Economic Survey tabled yesterday was yet another disappointment of sorts. Disappointment, because it didn’t really have the punch which could signal a big bang growth for at least the next two years, but definitely grounded to reality considering that there is a lot of backyard cleansing that needs to be done for higher growth to really kick in.

The NDA had handed over to the UPA an economy which was growing at above 8% a year. 10 years down the line, the UPA has handed over to the NDA an economy which is growing at just around 4.8 – 4.9%. In the light of this, the projection of a 5.4 – 5.9% growth for FY 15 certainly looks on the better side. The survey tabled by Finance Minister Arun Jaitley ahead of his budget today calls for easing of procedures to ensure higher growth along with measures to rein in inflation which has been the biggest worry of recent times.

According to reports, the expectation of growth hitting the lower band of the projection is much higher.  But it is far better to peg expectations on the lower side and deliver higher growth than vice versa. The UPA2 had projected a growth of 6.1 -6.7% growth for FY14. We all know, what happened in reality. The impact of a failed projection and that too with such a huge gap is normally too bad for the markets, than the impact of a lower projection itself. In that sense, the NDA has managed to be more pragmatic than its predecessor.

A reforms agenda on three fronts as chalked out by the survey is expected to revive investments in the country and hence growth too. A framework for sustained, low and stable inflation, realigning public finances on a sustainable path by setting in tax and expenditure reforms and last but not the least, creating of a legal and regulatory framework for a well-functioning market economy are the three main aspects to focus according to the survey. Well, the intentions at least look good. Implementation remains the key to success.

Among the many recommendations spelt out in the survey, a huge thrust has been placed on tax reforms, which could be the highlight of today’s budget proposals. There is a possibility of the Finance Minister kick starting the reforms process with the tweaking of the tax regime. Abolition of bad taxes such as cesses, surcharges, transaction taxes and dividend distribution tax could be on the cards which have found and explicit mention in the report. The simplification of the tax regime could begin with the partial introduction of the Goods and Services Tax (GST). Doing away with the draconian system of retrograde taxation surely looks to be on the mind too. We are just a little more than a couple of hours away from the Budget.

The trading day will surely kick in with a lot of anxiety over what lies in store. But the anxiety is unwarranted so to say. There have been enough signals over the past week or so which point toward a budget which will be economically good and probably a politically bad one. We have consistently propounded the need for tempered expectations from the government which just taken the reins of the country in its hands. Steps are being initiated and results will follow with a lag. It takes time for the measures to start yielding the desired results and when an economy of the size of India is concerned it would taken even a slightly longer time. keep your fingers crossed and be patient.

As expected the markets reacted with thumbs down to the economic survey sliding for the second consecutive day. You could witness the most nervous opening of recent times today. Global cues are looking good today. The US market ended on a positive note yesterday. Signaling that the economy was improving, the US Federal Reserve has hinted that it may close its stimulus programme by the end of this year. The markets there have welcomed this. The Dow and the S&P 500 were up almost half a percent yesterday, while the Nasdaq was up by a slightly better 0.63%. On the Asian side except for Japan all others are trading well in the green.

Today will be quite decisive for the future direction of the markets. As mentioned, it could be one of the most nervous openings with cautious trades until the FM rises to present the Budget. An economically good but politically bad Budget is what the market is already discounting. Any deviation can send the benchmarks zooming up. Better to wait in the wings and let the euphoria or dysphoria (as the case may be) subside. From now on, it will be the long term fundamentals that will drive the markets. Invest to gain in the long term with realistic expectations on returns. No rocket science there!