Market reacts to the Budget's packaging, not substance

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

By Vivian Fernandes, Economic Policy Editor, CNBC-TV18

 

The panel of discussants I was associated with on CNN-IBN did not share the stock market's disappointment with the Budget. Former economic adviser Shankar Acharya  rated it "almost good", Shubhashis Gangopadhayay, former adviser to former finance minister P Chidambaram found it "good", former revenue secretary N K Singh agreed and the country head of  ABN Amro Bank (now RBS) said it was "good and honest budget" because it did not hide the large fiscal deficit of 6.8 percent in off-Budget items.

 

The markets seem to dislike subtlety. They want it written in black and white in bold letters. They wanted the Finance Minister to set a large disinvestment target. They wanted him to clearly spell out the reforms that would be undertaken. They think this is a safe, status quo budget.

 

I disagree. Just because the Finance Minister has not shouted from the roof tops the reforms the government is going to undertake does not mean that those reforms will not be undertaken. It is not Pranab Mukherjee's nature to be flamboyant. P Chidambaram needed to make a declaration just to keep faith in reforms alive at a time when he did not have the numbers in Parliament to deliver them. Pranab Mukherjee does not need to state the obvious. The President's Address has set the agenda. It is a clear commitment to Parliament.

 

A smart politician would not like to bring all the opposing forces together by waving the red rag of controversial reforms. Look at the opposition that HRD minister Kapil Sibal ran into when he announced a one-nation-one-school-board! The petrol and diesel price hike was done surgically. That is how you will see reforms done: without fuss, with purpose.

 

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