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It's politics vs. economics again - Views on News from Equitymaster
 
 
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  • Jul 6, 2009

    It's politics vs. economics again

    As the Finance Minister, Mr. Pranab Mukherjee, rises today to present his fourth regular budget (he presented three while being the finance minister in the Indira Gandhi cabinet from 1982-84), the nation's eyes will be on him as to what he pronounces in the name of reforms. This, while having his hands tied down by the mammoth fiscal deficit.

    Things are quite different than they were when Mr. Mukhrejee held this role full-time in the 1980s. India was then a closed economy. Today, it's a part of a highly globalised world where economic barriers are relatively non-existent and the role of a finance minister is much more dynamic and challenging. Over that, he inherits an economy that is now exposed to the worst worldwide recession since the Great Depression of the 1930s.

    Expectations from him seem to be running sky high. A quarter of a century after he presented his last regular budget, he is now once again being asked to steer the economy through choppy waters. His success in doing so will go a long way in determining India's ascent to the higher echelons of the global economic order over the next five years. But do not expect the sky in the short to medium term, as the media would have made you believe. This isn't India's 'biggest budget ever' as it is made out to be. Yes, for the size of our fiscal problems or for the sheer count of those involved in the budget making exercise itself, this could still be India's biggest budget ever!

    Expectations are running high for the finance minister to spell out the 'reform package' and investors might turn euphoric or despondent going by what the minister actually delivers today. But for you dear investor, all we can wish for is sanity, caution and discipline in whatever investment decisions you take.

    You need to stand still and weigh your stock investing options very carefully, and only after considering the environment around. And more importantly, the company's real worth. After all, a budget is but an annual exercise and must not define your long term investing objectives.

     

     

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