India was never in recession most of the Economic Surveys predicted healthy GDP growth rate - however the Indian Consumer Sentiment were, as per some of the latest Consumer Confidence study - Consumer confidence in India has been dipping over last couple of months with signs of picking up in between. It was not the ability to spend but consumers desire to do so that got dampened. The country's recently found predilection to spend got tampered. We saw more & more Indians (even the ‘carefree’ Gen Y) exercising prudence.
Keeping these low sentiments into perspective it will be interesting to see what the latest Budget will offer.
However before we get into what to expect here is an interesting factoid about the origin of word ‘Budget’. One of the several stories that explain the word is that it borrows from Latin word ‘bulga’ meaning ‘a leather bag’. Within the bag one’s monetary resources were kept. In the 1880s the word began to be used as a verb to describe one’s expenditure and the attributive meaning of “inexpensive; suitable for someone of limited means” was as late as 1958.
Coming back to budget - Even though the consumer confidence has not been high lately but our economy seems to be gaining steam – GDP is set to expand more than 8% next fiscal year compared with 7.2% this year – the big question is will the government use this leeway to remove some accommodative steps it took to bolster business activity and consumer spending. Probably the answer is yes our Finance Minister Pranab Mukherjee is likely to re-embrace fiscal discipline. However as Mr C. Rangarajan, chairman of Prime Minister’s Economic Advisory Council said “Exit measures should be calibrated in a manner that stimulus in the economy should continue. At the same time, some adjustments will be made to bring down the fiscal deficit,”
In short run this may not go down well with few classes but controlling of fiscal deficit, inflation will bring a smile on wider set of audience; which brings us to the other big challenge of ‘Inclusiveness’
Our President’s speech has given clear signals that the government firmly believes that the benefits of welfare should reach the aam aadmi. She say “My Government will aim at a growth rate of above 8% in 2010-11…”, and goes on to add that “We’ll ensure that the growth process is equally sensitive to the concerns and the well-being of the weaker sections of society”.
In short we will have to find stability through growth and not choosing one over the other. So the coming budget will need to balance factors like growth-inflation or populism-macro economic factors or excessively rewarding the present over the future.
"There are three things not worth running for - a bus, a woman or a new economic panacea. If you wait a bit, another one will come along." Derick Heathcoat-Amory – British Conservative politician
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