It is surprising the way media is creating a hype of the forth coming budget. All business channels in particular are geared up for this Friday the 26th February 2010. You have posters of emminent personalities who would be giving their views on the budget. Then you have advertisement by a business newspaper “BUY, HOLD, SELL ” strategies to be passed on by the so called experts of the markets. Newspapers are meant to give news. However now they have started providing invetment advice. Is it convergence of media and finance or just plain marketing? Difficult to say in the present chaotic world where one does not know where one is going.
What is a Budget? The finance minister will lay down a road map for the economy and give an estimate of the expenditures. He would lay down the sources of income to meet these expenditures in the form of taxes. As every year the expenses would be more than the income resulting in a deficit figure. This figure would also bloat by the end of the year as has been happening every year leading to a higher deficit. The said would be justified by giving an example of the US economy whose deficit is much more than us. Thus deficit financing goes on and on.
Finance Minister’s Compulsions: Think twice before expecting the FM to act rationally. He also understands that you can not run your household expenses by not earning. Everyday you cannot be borrowing to meet your expenses. However here he has a mamoth task on hand. He represents a political party and is a part of the coalition government. Can he make rational decisions? Votes matter, lobbies matter, what coalition partners want matter, politics matter etc. His hands are tied.
Enter Self Appointed Advisors to FM: Since last week we have been hearing so much debate about what should the government do and what it should not do. Different experts from different fields give their take on what the FM should be doing. Does anyone care to understand the stark realities. You got to be in the FM shoes to understand that. So each of these advisors are speaking from their point of view with half baked knowledge. Should we be giving such talks any importance?
Enter Astrologers on the Budget day: The budget speech starts and everyone is glued to their TVs. Stock market fluctuates with proposals coming in. Its more of reaction rather than response. Can we act on mere proposals withot reading the finer prints in the budget? However experts are ready on different channels giving their expert views on a certain proposal that will affect the industry and this results in wide fluctuations in stock prices. There is chaos as every analyst, business head, professional become astrologers trying to predict the effect of the proposals. They give judgement on what the FM should have done and not done. This chatter ends with the closing bell of the stock markets. Viewers are now more confused: one by the predictions of the astrologers and other by the fluctuations in the stock prices. They now wait for the real experts with their comments in the evening.
Enter the Genius and the Brilliant: Evening shows after the markets are reserved for the politicians form the ruling party and the opposition, the captains of industry, stock market pundits,the bankers and the leading advertisers of the respective medias. Each one has an agenda. If excise duty on paint is increased the paint industry will cry foul. If tax on dividend is introduced the financial markets will complain. The ruling party will defend the budget proposals while the opposition will slam it. The PSU heads will hail the budget but the counterparts in the private sector may hold a different view. The diplomats would praise the budget, criticize it and at the same time sympathise with the FM. Others would blame the FM for missing an opportunity. Ultimately all are talking from their own point of view. This leaves the viewers more confused and past midnight they go to bed wondering whether the day was well spent and what did they learn?
Here are some rational thoughts:
1. The budget had some meaning when we were in a closed environment. However with the liberalization it has lost its meaning. Its only the media that has ignited the hype to increase their TRP.
2. Making investment decisions based on informantion flowing on the budget day is akin to gambling. You only make the intermediaries rich.
3. The budget proposals need to be studied in detail before one can study their impact. This takes time. Experts shooting off their comments on the budget day are misleading you. You must avoid any activity on stock markets based on such expert comments.
4. If everyone is happy with the budget then there is something to fear. Tough decisions have not been taken. It will harm the economy in the long run.
5. If people find the budget good then it will be bad for the economy. If they find it bad it will definitely be good for the economy.
The deficit need to be curtailed. If that has to be done the FM needs to take tough decisions like increasing petrol prices, doing away with subsidies, introducing more taxes, avoiding poulist schemes etc. People will not like it and the FM will need the political will and the courage to do the right things. Can coalition politics allow that? Well in short this is the answer to the question of budget being good or bad. You just spent a week hearing crap, now dont repeat the mistake on the 26th February 2010.