Govt to announce stimulus packages for economy: Karvy

Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

According to Karvy Stock Broking, the countdown commences for the presentation of the Union Budget, the first of the reelected United Progressive Alliance (UPA) government on 6th July 2009, the stock market expectations remain high. The capital market is of the view that the government can stimulate the economy, reinforce fiscal prudence and yet enhance social welfare programmes. We are less optimistic and though we believe the government would announce some stimulus packages for the economy, fiscal deficit constraints would limit the efficacy of such proposals.

Investment in the economy remains the key

Over the last 16 years, the central government abdicated its responsibility for creating infrastructure in the economy by reducing its plan capital expenditure to GDP from 3.9% in FY1994 to 0.6% for FY2010BE. This neglect was
partially compensated by private sector investment in FY2006 - FY2008, but with the economic slowdown and the drying up of global liquidity, the private sector is currently unable to drive investment in the economy. Therefore
in a period of slowdown, it is only the government which can raise the resources and undertake the risk for capital investment.

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