A mixed bag at best: Madan Sabnavis

The Budget was not supposed to be revolutionary but was expected to address the issue of growth. On this, the proposals blow hot and cold. A Keynesian expansion was expected to prop the economy, and was logical considering that the government is the only entity that can borrow at a low rate and spur growth.

By sticking to the fiscal responsibility and budget management (FRBM) target of 3.5 per cent it has made its approach clear that whatever growth impulses can be provided will be within the contours of the FRBM milestone and a lower borrowing programme.

The latter, however, is good for overall liquidity and the Reserve Bank of India hence needs to have less concern over the government crowding out the private sector.

The approach to bank restructuring has been quite ambiguous though. While capitalisation amount of Rs 25,000 crore was expected, the government has chosen not to enhance the same or bring in reforms. The reforms that would have been useful are disinvestment of banks to up to 51 per cent as also the merger of weak public sector banks with stronger ones.

Madan Sabnavis
Chief Economist, CARE Ratings