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In a chat with ET Now, Shankar Sharma, Global Trading Strategist, First Global, shares his views on the Union Budget 2012.
ET Now: Do you think this budget has done precious little for Indian markets and it will not help Indian markets to breakout of near term challenges?
Shankar Sharma: No, I do not really care what he has done for the stock market. Stock market is a two-square mile phenomena in India. It should do well for the two million square miles in India. That one we will have to see how much good that has done. I heard Professor Debroy's question to Mr. Parekh on the previous reductions having being only 0.5% I like to point out the kind of reductions we saw between 2005 and 2007-2008 when we were down to 2.5% GDP from a previous number of something like 4%.
So, it is not as a 0.5%, it is about the maximum we have seen happened in the past in terms of the fiscal deficit reduction. Admitted that, that was a very good year of growth that even so the fact of the matter is that we have done substantially better than 0.5% deficit reduction, even as recently is 2007, 2008. on the point of the growth number itself I would agree with Mr. Parekh, I think 7.6% is probably understated a tag but Finance Minister's job is not to blow up expectations. He has played the game of expectation management quite well.
In fact, it is highly probable that if RBI really sort of steps in and lends in my view a long overview helping hand by way of reductions not asking to 300 bps, even a 100-150 bps reduction that itself will be quite substantial in terms of aiding GDP growth. Because imagine last year that is the current year we are in almost everything that could go wrong, went wrong. We had the Anna Hazare movement which completely stalled decision making and there are estimates that it cost 1% to GDP growth itself and then you had high inflation and then you had a very misplaced RBI policy of raising rates.
We have seen that the results of that has simply not happened because my view has been that inflation could not be controlled by Mint Street, it is a global phenomenon, as far as the food basket is concerned. But in the process what you ended up doing was ended up hitting growth, which is why this fiscal deficit has gone to 5.9%, there is nothing to do with the Finance Minister's problem. He has made a forecast but the forecast has been thrown out of the window because of a successive series of rate hikes.
I can understand a few but to have done as many as what was done was excessive to say the least that hit the growth. India's corporate numbers obviously disappointed that is directly affecting tax receipts, tax receipts from the bulk of your revenues. It had become a negative spiral. If Mint Street just gives economy a little bit of headroom, the inherent consumption boom is very very strong in the economy and that I am 100% sure that rural India's consumption is not a flash in the pan. That itself will more than make up for any kind ofother problem that exists. So I would hold out the view that we might even tops 7.6% GDP growth this year and in the process probably end up bettering the 5.1% fiscal deficit target.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In a chat with ET Now, Shankar Sharma, Global Trading Strategist, First Global, shares his views on the Union Budget 2012.
ET Now: Do you think this budget has done precious little for Indian markets and it will not help Indian markets to breakout of near term challenges?
Shankar Sharma: No, I do not really care what he has done for the stock market. Stock market is a two-square mile phenomena in India. It should do well for the two million square miles in India. That one we will have to see how much good that has done. I heard Professor Debroy's question to Mr. Parekh on the previous reductions having being only 0.5% I like to point out the kind of reductions we saw between 2005 and 2007-2008 when we were down to 2.5% GDP from a previous number of something like 4%.
So, it is not as a 0.5%, it is about the maximum we have seen happened in the past in terms of the fiscal deficit reduction. Admitted that, that was a very good year of growth that even so the fact of the matter is that we have done substantially better than 0.5% deficit reduction, even as recently is 2007, 2008. on the point of the growth number itself I would agree with Mr. Parekh, I think 7.6% is probably understated a tag but Finance Minister's job is not to blow up expectations. He has played the game of expectation management quite well.
In fact, it is highly probable that if RBI really sort of steps in and lends in my view a long overview helping hand by way of reductions not asking to 300 bps, even a 100-150 bps reduction that itself will be quite substantial in terms of aiding GDP growth. Because imagine last year that is the current year we are in almost everything that could go wrong, went wrong. We had the Anna Hazare movement which completely stalled decision making and there are estimates that it cost 1% to GDP growth itself and then you had high inflation and then you had a very misplaced RBI policy of raising rates.
We have seen that the results of that has simply not happened because my view has been that inflation could not be controlled by Mint Street, it is a global phenomenon, as far as the food basket is concerned. But in the process what you ended up doing was ended up hitting growth, which is why this fiscal deficit has gone to 5.9%, there is nothing to do with the Finance Minister's problem. He has made a forecast but the forecast has been thrown out of the window because of a successive series of rate hikes.
I can understand a few but to have done as many as what was done was excessive to say the least that hit the growth. India's corporate numbers obviously disappointed that is directly affecting tax receipts, tax receipts from the bulk of your revenues. It had become a negative spiral. If Mint Street just gives economy a little bit of headroom, the inherent consumption boom is very very strong in the economy and that I am 100% sure that rural India's consumption is not a flash in the pan. That itself will more than make up for any kind ofother problem that exists. So I would hold out the view that we might even tops 7.6% GDP growth this year and in the process probably end up bettering the 5.1% fiscal deficit target.
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