Finance Ministers frequently disavow any interest in tracking stock markets, and after the budget today, Finance Minister Nirmala Sitaraman will probably feel the same. After all, in a budget where she arguably made the biggest single announcement of all her 8 budget speeches, the response from the stock markets has been tepid, to say the least.
The move to raise the income tax limit to effectively Rs 12 lacs is a bold, huge move, that compensates for years of over taxation on the middle classes, many would argue. It will hopefully deliver the results the government wants, both politically and economically in the form of a recovery in consumption, something India has been missing sorely. In the new age of chaotic global markets stirred up by President Trump, India also seems to have decided to make a bolder bet on its domestic markets, rather than count on exports, as the focus seemed to be until not too recently.
The stock market reaction, which saw categories like FMCG, retail and other consumer sectors like two wheelers rewarded immediately explains one side of the picture. The other side is the decline in the stock prices of what we call industrials or the large manufacturing led firms, mainly due to the absence of any similar proposals on the corporate tax front, or ease of doing business other than for startups etc. The reduction or lifting of duties on equipment and materials considered key for sunrise, strategically important sectors like EVs, clean technology and more is common sense thinking that will support further investment. It will need to be followed up by more targeted initiatives still like Performance linked incentive (PLI) schemes for components in these segments, and not just the headline products like solar cells, or Lithium Ion batteries.
In agriculture, the focus on Pulses with the announcement of a 5 year national mission is also welcome, and one hopes this will see better execution and results than the national oilseeds mission, which has simply not delivered anywhere close to what was promised. Pulses of course are not just a critical source of proteins, but also a more climate resilient crop that needs to be available more widely in a nutrition stressed country like ours. In that respect, the ridiculous inflation seen in their prices over the past 4 years is simply unacceptable, besides the rising dependence on imports.
In conclusion, one has to say that the budget has depended on just one cookie cutter announcement in terms of the change in income tax limit, placing a significant bet on its ability to kickstart a virtuous cycle of consumption and more private sector investment. On other aspects, it seems to have taken a more incremental approach to change, focusing more on improving efficiency and reducing interface with the bureaucracy, than anything else. The latter might be an underappreciated step, and if executed well, will surely be acknowledged in time as well. A 7/10 budget for me.
— The writer is Market analyst and Group Editor, SaurEnergy.com
