Budget 2012-13 will soon see the light of the day. Over the last few years, the budget has lost its relevance for the markets with actual achievements consistently falling short of targets. Moreover, expenses have often overshot the original limits. However, this time, the things are different. The Indian economy is dragging its feet and markets are getting adversely affected by global economic scenario.
The domestic government too has been blamed and criticized for policy paralysis in the current fiscal. It took a critical situation like the one we faced in 1991-92 to go in for economic liberalization. As the bad times are here again, chances are that the survival instinct will make the government shed its inertia and undertake reforms to promote investments and economic growth. At the current state, the segments that seem to be the key potential beneficiaries are agriculture and infrastructure.
The government has invited lots of brick bats on account of food inflation. Hence, we will not be surprised to see some major positive developments here as this is something that affects the entire population and is a key determinant of overall inflation levels in the economy. Besides, a reform in this sector and investment across the entire value chain will take care of employment generation as well.
Coming to infrastructure, a mix of environmental issues, land acquisition hurdles, high interest rates and delayed clearances have dropped the investment proposals to five year lows. As a key emerging market and aspiring to be the global superpower, the urgency of investments in infrastructure can hardly be undermined. However, this is something for which Government will need to seek support from private sector as its own fiscal balances remain out of order.
The impact of global events hasn't turned out to be very favourable for India and for the lack of any near term catalysts to propel Indian growth story ahead, it seems the right time for introducing a reformist Union Budget. The sooner the government bites the bullet, the better it will be for the Indian economy.