
Indian markets crashed on Monday reacting sharply to the Union Budget 2009-10 presented by Finance Minister Pranab Mukherjee. The key Bombay Stock Exchange indices, which had surged in run-up to the budget on expectations of reforms, caved in after it turned out to be a “budget of continuity and inclusive growth.” The reaction of the market—which consists of big money making businesses and multinational corporate—is not at all surprising though it must be mentioned here that it is equally of concern that there is a huge divide between modern (small) India and the rural masses. While corporate India must thrive, it should not be at the cost of the rural masses. After all growth must be inclusive taking all sections of the people into consideration. While one may not be an Industry expert, it does not take even a layman to find the knee-jerk reaction of the market as bizarre and irrational. Take for instance some of the steps taken in the Budget. The Centre has hiked the allocation for its flagship rural job scheme (NREGA) by 144%, earmarking a whopping Rs 39,000 crore. Then there is a Bill to ensure food security to be moved soon, full interest subsidy on education for the weaker sections, increase in allocation to rural health schemes and schemes for inclusion of women. Another Rs 2,000 crore for Rural Housing Fund has also been allocated. The Finance Minister also announced specific measures to enhance investment in infrastructure and boost domestic consumption through lower tax burden. All in all there is obviously a bigger agenda for inclusive growth & social equity. Unfortunately the market has responded in the way it has, which goes to show the sole intention of the money market to focus solely on profit-making and elusive growth.
Coming to the demand for big ticket disinvestment and the market expectation thereof, the response of the Finance Minister in the post-budget interviews is both correct and the proper thing to do. In fact, one of the primary reasons for markets slipping in the red was because of the disappointment after the Finance Minister said PSU banks and insurance companies would remain under government control and was less specific on the divestment front. The industry on its part wanted the Government to announce a policy for disinvestment of PSUs in the Budget to generate funds and even went to the extent of articulating that there was a potential to raise at least Rs 80,000 crore through dilution of Government in leading profit-making PSUs alone. And this is where the industries assessment is out of place. As the Finance Minister rightly stated, the PSUs are the wealth of the nation, and part of this wealth should rest in the hands of the people. While no one is against disinvestment of PSUs, the manner in which it has to be done should be proper and in the national interest not the capitalists. Firstly the public must get a good price for it rather than selling it in distress. This is one of the point mentioned by Mr Pranab Mukherjee—the need to wait for the right time to go for disinvestment. Likewise the decision not to go for disinvestment of banks and insurance companies is very wise and correct especially in the backdrop of the recent market meltdown and several of the top foreign banks and financial institutions going bankrupt because of the unregulated market that they imagined they will forever thrive under. The Union Budget may have fallen short of high market expectations but what a country of one billion plus people need is an inclusive growth with equitable allocation of resources and benefits accruing to every section of society.