Why the market is disappointed
The market which began on a positive note before the commencement of the Budget speech by Pranab Mukherjee registered a downtrend as Pranab unveiled the Budget. In its worst performance in recent weeks, a key index of the Indian equities markets ended trade Monday nearly 870 points down from its last closing figure. There were many reasons why the market was disappointed.
There were expectations of special initiatives to boost FDI, but those hopes were belied by Pranab. There was no proposal to hold the fuel pricew line. Investors blamed lack of policy announcements and increase in minimum alternate tax(MAT) on corporates for the negative reaction. The rising fiscal deficit also affected market sentiments. The fiscal deficit is pegged at 6.8 percent of the GDP. The fiscal deficit was originally estimated at 2.5 per cent of GDP for 2008-09 but widened to 6.2 per cent after the government cut excise duty rates by 6 per cent and service tax by 2 per cent and increased planned outlay to spur the economy, slowing due to the global financial crisis. The budget's increased deficit spending is not unusual in the current global financial climate. As Pranab said: "At the moment there is not a single country - apart from China perhaps - that does not have deficit spending. We have had the biggest economic crisis of our times - there is no choice."
