Expectations, predictions, educated guesses and speculation surrounding the Union Budget are behind us and what we have now is the reality of the Budget documents placed before the Parliament! It was probably unfair to expect miracles from the Finance Minister, given the complex challenges facing the economy. Between keeping the fiscal deficit within reasonable limits, satisfying the clamour for lower rates of personal taxation and simultaneously providing a thrust to growth was clearly a Himalayan task. Be that as it may, one would still have to conclude that even the most moderate of expectations have been belied.
Corporate India, already the beneficiary of the generous tax rate reduction in September, is doubly benefited by the scrapping of Dividend Distribution Tax. But was that the priority? No doubt, the generous allocations for the rural and infrastructure sectors are in line with expectations and indeed, welcome. The latter, in particular, has been one of the key drivers of growth in recent years and deserves to be carried forward. Over the past few months, much has been written about the liquidity issues dogging the NBFC sector. However, banks have been flush with liquidity, as have many of the large and well-managed NBFCs.
In fact, the really worrying factor has been the weak demand, across the two-wheeler, passenger car and commercial vehicle segments, all of which have witnessed significant double-digit declines in sales over the past year.
While it is well-nigh impossible for any Finance Minister to satisfy all sections of the public, one expected a few specific measures to spur demand; sadly, these are conspicuous by their absence.
But the deed is done, and the din and bustle of television debates will run their course. What remains however, is the reality of surplus capacity, depressed consumer sentiment, heightened risk aversion and an uncertain global environment. These, and more, are what we shall have to contend with in the months ahead. The Budget was long on words and short on numbers.
(T.T. Srinivasaraghavan, MD, Sundaram Finance)
