So much for the core duties of the Budget, to take a look at the inconsistencies in how a government raises revenue. The next concern is the situation in which India is: a tough business-cycle downturn, and adverse external circumstances. There is as near a consensus as there ever is in economic analysis that deficits, while a problem, are less immediately dangerous than allowing possible green shoots of recovery to shrivel and die. So budget-as-stimulus was also necessary to watch. How does the FM perform? Expenditure is increased, and more resources put in the hands of consumers. Looking just at the deficit numbers, the Budget alone has pushed another 0.8 per cent of GDP out the stimulus door. But that massive expansion of debt will strain the RBI. A professional debt management office is overdue.

The immediate reaction of financial markets to news is not necessarily well-considered; separating the effect on a market index of widely differing factors, such as changes in sentiment, rational responses to fresh information, or speculators getting in and out, is something that should normally not be attempted without a decent time horizon and some perspective. Judging a political, pragmatic exercise by the reaction of the markets is naturally a temptation, but one in general that should be avoided. In this case, however, some preliminary observations about the reason for the market reactions are in order.

The effect was basically one of expectations. Expectations may have been unrealistically high about what a budget exercise could achieve, and unrealistically skewed as to what the aims of the actual exercise are. The exigencies of 24-hour cable news, in particular, may have played a part. A “big-bang-budget”, to use the unfortunate alliteration that appears to have become popular for some reason, was never on the agenda. A pivotal Budget, perhaps, but the maturity involved in sensing that pivotal measures do not need talking up is something that is yet to percolate through popular economic analysis in India. By now everyone should really have noticed that the problem with talking up a closed package is the inevitable disappointment when the package is opened.

... contd.