On the tried path, but practical: Madan Sabnavis

The Budget is fairly conservative in approach and has tried to provide incentives for growth and investment by allocating funds in the right areas and providing investment allowance for companies to induce capital formation. The overall capex, too, has remained virtually unchanged and the much-expected Keynesian thrust is missing.

It has, however, not been able to lower the subsidy expense but capped it at the earlier level, which is reasonable, given that it could be a difficult year for farming. The incentives provided on savings may not add too much depth and would be seen as being placatory to the middle class. The most important part is that the fiscal deficit target is being retained at 4.1 per cent of the gross domestic product, which means there will not be untoward pressure on liquidity or interest rates. To that extent, it is neutral. Banks have been provided some room for divesting. But given their current state of dealing with stressed assets, they might wait and watch.

Is this the right way? Probably yes, as there are around eight months for implementation and anything drastic would require bold steps and run the risk of non-attainment.

Madan Sabnavis
Chief economist, CARE Ratings