The Inside of Budget?

It was easy to announce the three stimulus package boost up the economy and make the investors happy and showing the growth story intact thought the coming year. It was easy to make the market rock and win the election with the finest majority but it will not be so easy to announce the budget.

There were many things and points that government ignored in the previous years but coming 5 years will be very much important and this year would be the base year for the coming one. Might be Hard or might with Harsh Budget can one expect to improve the economy of India, and believe me that is needed too.

Investors might get slightly disappoint with the coming budget but the fact could not be changed and definitely that will improve our fundamental strongly. This year we have list down few factors where this government has to play a major role and solve these issues to make India as Developed country.

These are just few challenges that Government will be facing in the coming Budget.

Controlling Frauds: Last year companies like Satyam officially declared manipulations in the books of accounts and this has created a insecure among the investors and this has lead to again loose of many jobs.

Government shall take majors steps to track these kind of frauds or track the Money which is involved into this kind of activity. Other than that Accounting standards should also improve and the concern individual shall be punished so every one gets fear of it.

Jobs: Jobs plays very important roles in the developing economy, the spending power of Indians comes from the Jobs and these jobs are standing on the sword either by the pay cuts or by the people cuts but most of the corporates. Sectors like Aviation, Financial, Jems & Jewelery, Auto, IT Including Software & BPO’s. These are just the organized sectors and what one could expect about the un organized one. This time government has to think to protect the jobs and also focus on the new jobs creation, only an until the bad phase could come to an end.

Borrowings: Increase in borrowings for the year 08 – 09 by Rs. 266539 cr. against the expectation of Rs. 99000 cr. and the interim budget for 09 – 10 had revised the estimates for the revenue deficit to 4.4% and the fiscal deficit to 6% of the GDP compared to the estimates of 1% – 2.5%. The Biggest challenge for this government would be how they would show the growth intact and reduce the deficits so that our base become more & more powerful.

Bad Days for IT & BPO’s: One cannot ignore the statement done by the US president Barack Obama, who is trying to over come the huge recession of US after 1930. Is that he has already shown a hint towards the outsourcing. In his latest package, he has provided Aid to companies who believes in buying Either American Products, Services, Employees and even raw materials. US also plans to curbs H1B for creating jobs in America. So one can think more coming years will be very hard for these industry and Indian might get start sifting to India only if good jobs are been created by the corporates.

Exports: Exports were done to the Developed country like US & UK and many others and if these country are into recessions, so that has affected Indian Exports by 33% – 35% Decline by over March 2008 – 2009. Government expected that in last 2 Quarter Exports will revive but disappointing that did not happen and finally policy makers predictions were just into the dustbin. This decline in Exports have make people lose their jobs and the figure has reached around 10 millions.

Infrastructure: The Prime factor to boost up the economy is Infrastructure projects where we are past behind as per the guide lines. We hare reported 2.80% less growth against the exception of 5.80% in April 08 – Feb 09 compares to previous years. Instead of introducing the new projects, the existing projects shall be completed which are way behind due to acquisition of land, financial problems, increase in the interest rates and so on. Government shall not only trust on private firms to complete the projects but could take on their own to complete it. Again Jobs are created and more & more people are employed for the completion.

Power Sector: The most upcoming sector, as there is a Gap to be fulfilled against the Supply & Demand but due Government rigid policy makers & their policies India is still thirsty about the power. Manny big cities are facing power cuts during the day time and that has lead to reduce in the production in the Industrial Area. The planning was to add a target of 80,010 MW and we have just reached to at around 12717 MW and by 2009 – 2010 we have increase the shortage of power by 0.7% to 12.60% compared to 11.9%. And the simple reason behind is not the money but the local protest, easy policies not available, problem in land acquiring, storage of fuel & proper equipments. The Government has a chance to overcome it and start the bankrupt electricity boards of India.

Agriculture: Like Manny other countries India is also depended on the Agriculture. Government need to identify the problems in this sector and that could be the pending bills of rural development are still on the hold like Rehabilitation Bill 2007, The Cotton Growers Bill 2004, Agriculture worker Welfare Bill 2004. Also the production got hit due to floods in major agriculture areas of India and that has rise to reduce in the production.

Small Scale Industry: The new government polices shall not kill the small business man, who plays the important role in the economy of India. Supporting such kind of units and make the policy simpler and that would help everyone in or outside the sector.  Government shall bring such price mechanism where the prices could be controlled in simpler way where the respective industry and any other industry which is using that product shall not bear the losses. Supporting small business by making common taxiing policy throughout the India, such kind of initiatives will help the industry.

Promoting Investments in India: The Main and key role of the Government shall be bringing money to India either in any of the industry or the equity markets and that shall remain for the long term horizon. India needs that money in that system and this could be possible either by making easier policies for the Investors and encouraging them by showing the Growth story of India. But other than that Government has to play a major role to track corporate frauds which kills the confidence level of an investor.

Big agenda for a Big Government seems easy and but could be hard with less money in the pockets and in the time frame of 5 years, where they have to prove for the next coming elections that we have done something better than nothing.

This time every one eyes are on the Budget with a expectation that this government might change something and could boost up the economy where we could sit and say we are a developed country. Investors with a expectation from a government that they might delivery a good budget, they will definitely but not in the context of small or medium term but just for the long term and do not forget sentiment of the equity markets might not digest and show a down fall if the budget is in favor of India.

Sumit Jain
Money Grows with Sufin