Budget strikes a positive note: Axis AMC
On the whole, the budget does inspire some confidence in achieving at least some of the above objectives. While the budget did not envisage any bold measures and was far short of reformist, the focus still remained on fiscal consolidation with incremental steps on a number of fronts.
February 28, 2011 / 18:22 IST
Chandresh Nigam, Head Investment, Axis AMC gave his views on how he read the budget presented by finance minister Pranab Mukherjee for financial year 2011-12.
The Finance Minister at the outset laid out the objectives of the budget. These were i) achieve fiscal consolidation to allow resources for the private sector to grow ii) take steps for structural improvement in inflation management iii) ensure flow of resources to rural India to enable inclusive growth and iv) Arrest the drift in governance and improve regulatory standards. On the whole, the budget does inspire some confidence in achieving at least some of the above objectives. While the budget did not envisage any bold measures and was far short of reformist, the focus still remained on fiscal consolidation with incremental steps on a number of fronts. The fiscal deficit (4.6% of GDP) targets though aggressive, especially considering the likely increase in subsidies which has not been accounted for, revenue numbers look reasonable. Importantly the budgeted spend on key social programs has been controlled. Reasonable tax buoyancy and controlled revenue expenditure (other than subsidies) will lead to improvement in the fiscal situation in FY2011-12. A lower fiscal deficit number has allowed the government to have a reasonable borrowing plan (Rs3.35tn), which is positive for both the level of interest rates as well as the availability of money for the private sector, which is important if the country has to see a revival in private investment that has been flagging over the last couple of years. Announcements on reforms like DTC, the independent debt management office, IT infrastructure backbone for GST and targeted introduction of a number of other key bills highlight the continued commitment and progress of to reforms.The government has continued to focus on inclusive growth, with emphasis on investment on the rural economy. Credit from the banking sector to the agricultural sector has been increased by over 26% to Rs 4,75,000 crore. Further budgetary allocations to NABARD for short term credit enhances credit availability in the sector. In line with the objective of reducing wastage and focus on food processing, the cold storage industry has been given the
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