Dalal Street Investment Journal

ACHHE DIN AANE WALE HAI!

The sincerity with which the Modi government is going about its task until now is really appreciable. First, it hiked petrol and diesel prices, followed it up with the rail fare hike, and then came up with the very conservative Railway Budget, which was followed up by an Economic Survey that many thought was a disappointment of sorts. The final and the most important trigger for the entire economy and the most awaited event was the Budget. Finance Minister Arun Jaitley has provided a complete roadmap of the government for the next five years in his maiden Budget. Something that many thought was a complete let down in the beginning, finished up as a plan with a 360 degree view of the economy.

The NDA had handed over to the UPA an economy which was growing at above eight per cent a year in 2004. Ten years down the line, the UPA gave back to the NDA an economy which is growing at just around 4.8 – 4.9 per cent. In the light of this, the projection of a 5.4 – 5.9 per cent growth for FY15 made in the Economic Survey certainly looks on the better side. The Survey tabled by Finance Minister Arun Jaitley ahead of his Budget called for easing of procedures to ensure higher growth along with measures to rein in inflation which has been the biggest worry of recent times. The budget reinforces the government’s resolve to address these issues in a judicious and tactical manner.

One of the most remarkable features of the Budget presented by Jaitley is the absence of those humungous numbers on social spending. For an economy which is struggling to get back on its feet, restraint in spending is most important. And that is exactly what Jaitley has done. While he has addressed every issue across a very wide platform, the allocation in terms of finances has been kept at a minimal level, thereby helping him to peg the fiscal deficit at 4.1 per cent of the GDP. In fact, his next year’s (FY16) estimate is rather ambitious. The FM intends to maintain the fiscal deficit at 3.6 per cent of the GDP next year.

There are many initiatives which are really noteworthy. The clarity with which spending has been earmarked on sectors like infrastructure, education, banking and power demonstrates a no-nonsense approach in tackling the need of the hour. While he has announced a low key spending at least over the next seven months of this fiscal (for which the Budget is essentially providing for), the winner comes in the fact that not much pushing and shoving has happened to garner higher revenues.

I am particularly impressed by Jaitley’s masterstroke of allocating a higher amount towards infrastructure development, particularly ports and roads on one hand and allowing banks to keep the monies raised for long term disbursal on these projects out of the regulatory restrictions of CRR, SLR and priority sector lending norms. This will ensure a smooth funding of the projects to be announced. Education is another sector where he scores well. New IIMs and IITs have been announced and a sizeable outlay towards skilling of the workforce bodes well for the future of the country. That is exactly why I say, this budget is future-looking.

The markets have been super volatile after the announcement of the Budget. Having lost ground initially, they did manage to recover all their losses only to go down again. In my view, the market is reading too much into issues like retrograde taxation, which was expected to be addressed by Jaitley. A clear assurance that such issues will not crop up in the future and those that are already pending would be addressed by a special committee should have been read properly before reacting to the expert commentators on the noise channels. Well, yes, there has been nothing marketspecifi c to prop up the market in the Budget, the single KYC and demat account sought to be introduced is a welcome step though.

There may be many detractors out there who would not want to subscribe to the FM’s plan of action. But the one factor that needs to be kept in mind is that it is a fairly balanced Budget which seeks to answer a lot of questions with the minimum possible resource outlay.

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Extravagance can be disastrous at this stage. Conservatism will win the day, for the economy and in turn the new government.

Along with an incisive sectoral analysis, this issue brings you one-on-one interactions with six key ministers manning the most important departments. Nitin Gadkari, Minister for Road Transport, Highways and Shipping; Dharmendra Pradhan, Minister of State (I/C) Petroleum and Natural Gas; Prakash Javadekar, Minister of State (I/C) for Environment, Forests and Climate Change; Ram Vilas Paswan, Minister of Consumer Aff airs, Food and Public Distribution; Narendra Singh Tomar, Minister for Labour and Employment, and last but not the least, Piyush Goyal, Minister of State (I/C) for Power, Coal and New and Renewable Energy. Th e plans chalked out by each of these along with the reinforcing Budget presented by Jaitley outline the roadmap for the Ache Dins. While good planning is just one side of the coin the other lies in the execution of the plans. With the Prime Minister overlooking the functioning of his key ministers, there is really no scope for a doubt on that front too. Ache Din appear to be on their way. Patience is the key.