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Saturday, 5 March 2016

BSE Sensex and Nifty 50 have rallied up by almost 7% post budget. Our experts and analysts are trying hard to find so many reasons for the recent three day rally, from reverse arbitrage trades to dividend announcements to US job data and of course Madame Yellen’s  and Mr. Draghi’s monetary policy meetings in second week of March. So what it means is that our markets don’t comprehend valid reasons for a bull run. Okay for the moment let’s undertake the last set of pillars as set out in the annual budget to find out some validity for the current stock market behavior. The fourth pillar is ‘Jab tak nahi hogi padhai, kaise karoge kamai’. Central government is trying to improve the current status of higher education, skill development and job creation. For that a higher education financing agency with corpus of Rs.1000 crore will be set up and entrepreneurship education and training will be provided in 2200 colleges, 300 schools and 500 government ITIs through online courses. For stimulating job creation GOI will pay Employee Pension Scheme contribution of 8.33% for all new employees enrolling in EPFO for the first three years with salaries up to Rs. 15000. At least this should incentivize private sector to augment hiring of semi skilled and unskilled persons even with no experience.
The fifth pillar is ‘Transform India from kaccha to pucca roads, highways and ports’ and for this infrastructure sector has been allotted Rs. 2.18 lakh crore which includes both roads and railways for the fiscal 16-17. Road sector individually has been allocated Rs. 55000 crore apart from Rs. 15000 crore to be raised by NHAI through bonds. In addition to all of this Motor Vehicles Act will be amended to facilitate entry of private sector, Public Utilities bill will be introduced to resolve PPP infrastructure disputes and new ceiling price for new gas discoveries.   
But the moment financial sector initiatives were unraveled, volatility index shoot up and markets nosedived for no reason really!!! Great Expectations for the PSU banks nothing else. How can everything be set right in one budget. Coming back to the sixth pillar, major announcements were: new commodity derivative products that will be developed by SEBI, SARFAESI Act will be amended so that sponsor can hold upto 100% stake in the ARC and of course Rs. 25000 crore allocated to the PSU capitalization.
Then comes the most beloved phrase of our government, “Ease of doing business” or in other words “We will make it easy” and it extended from rationalization of human resources in various ministries to Targeted Delivery of Financial and other subsidies, benefits and services bill using Aadhar framework.
And then a sigh of relief by one and all, FISCAL DEFICIT’ is 3.9%. With benefits of declining oil bill not fully passed on to the consumer this was expected and of course cutting wasteful expenditure, it started two years back with combining various ministries and higher level of transparency. Lastly taxes, we can’t do anything about them as Keynes had rightly said, there is certainty for only two things in life, death and taxes. The super rich have to shell out more, middle & upper middle class’s contribution to the tax kitty has also increased through various cesses and service taxes. But before we cringe from paying these taxes let’s think about another class of population completely cut from our ‘Transforming India’ which is also theirs. There are kids who still walk kilometers to reach schools which don’t have toilets or even water. There are families without LPG connections and electricity and have to send their kids to urban areas to join the ever-growing child labour. So think about your basic amenities which are actually a luxury, don’t waste them and of course PAY TAXES.    

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