BUDGET 1999-2000
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Marketmen look forward to a not-so-tough Budget

Aru Srivastava in New Delhi

As February 27, the B-Day -- B as in Budget -- nears, the capital market gathers momentum in its swings.

The finance minister and Prime Minister have hinted repeatedly at a tough budget. The fiscal deficit is expected to be 6.4 per cent of GDP as against the anticipated 5.6 per cent, say analysts at Birla Marlin India.

"With the pre-Budget drama of rollback in PDS and urea prices, it seems the BJP's allies will dictate the Budget," says an analyst.

However, Vijay Bhushan of Bharat Bhushan & Co says, "I don't think that this Budget will be harsh. Harsh measures such as cut in subsidies, etc, have already been taken before the Budget. So, psychologically, they will not be viewed as part of the Budget."

Sanjeev Bajaj of Bajaj Capital feels the Budget will be cool. "We are not expecting anything great. There won't be great giveaways -- even if the government wants to give them, it can't, the economic balance-sheet won't allow it to do so. It will be a run-of-the-mill Budget."

The observers are quick to point out that the industrial slowdown has led to a shortfall in the indirect tax collections to the tune of Rs 120 billion. Lacklustre industrial and export performance and negligible foreign direct investment and domestic investment have made it difficult for the government to boost revenues. And there was hardly any control on expenditure. Worse, the government's market borrowings have soared from 9.2 per cent of GDP in 1998-99 to almost 54 per cent in the current year.

All these facts, they say, will combine to exert an upward pressure on interest rates in the short run. "I don't expect the interest rates to rise as the Indian business is already plagued with high interest costs. So even though government borrowings will create an upward pressure on the interest rates, the demand-supply equation will negate this pressure," says Bhushan.

"The government should push the economy to a growth of seven per cent of GDP from the current 4.5 per cent level. It should increase capital expenditure, and create an environment for higher inflow of FDI and larger private sector spending in infrastructure," say the Birla Marlin India analysts.

Regarding the sector-wise allocations, the market is fairly unanimous. "There may not be good news for cement, paper or steel," says Anil Chopra of Bajaj Capital.

For the Budget-wary investor, Bhushan has a piece of advice. "I would advise the investors not to invest on their own but to go in for good mutual funds."

Budget 1999-2000

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