Budget Blue in the India Capital Markets

By Sandeep Parekh*

The budget in India, an annual circus held by the Finance Ministry on the last of each February, has done a good job at entertaining its prime audience, the Indian middle class - again. Since 1992, the annual budget has ceased to be an event which was looked at with fears of extra income, customs and excise levies. People in those days would stock items before the budget in expectation of increased prices and taxes. The reverse has been true since the calamitous period between 1990 and 1992 when the government went nearly bankrupt on the foreign exchange account. Now, for instance, and in contrast, the number of cars bought in the month of February drops on optimistic expectations of lower levies, only to pick up again in March.

This trend is a result of a timid but sure process of liberalization and integration with the world markets. Liberalization dictated by economics was supplemented over the same period by lower tariffs mandated by the entry of India into WTO. Despite a severe reprimand by economists who have condemned the high deficit levels there is much to cheer about for the average Indian who can look forward to cheaper goods and lower taxes on income. However, the stock market has expressed its...