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February 27, 1999
'I don't think the Budget does enough for growth'
I think the Budget has several features, positive and negative: On the positive side the rationalisation of taxes will result in benefits over time. The capital markets have also received a big boost, with the effort to push through incentives to funds and capital gains reduction. On the flip side, I think the Budget does not address growth of the economy, through revival of demand and increasing direct taxes is retrograde.
I think this is a clearly pro-mutual funds Budget -- we could not have asked for more. Money will pour in, especially from other investment avenues. And that's good news for the markets.
There is no specific impetus in my immediate reading to the fast moving capital goods sector since most of them will gain on excise but lose on corporate tax surcharge.
It is not for me to suggest policy changes for industrial growth. In my view, we require a stable political environment, lower interest rates, a devaluation of the rupee and a higher infrastructure outlay.
I am even more bullish on the FMCG sector now since I think we will not see earnings growth in the core/cyclical stocks for 1999 as well.
I am thrilled with the measures for mutual funds. I see a big shift in investor savings from other asset classes to mutual funds as a result of this. This may take some time, but it is clearly on the cards.
I agree with Uday Kotak on his assessment that mutual funds will gain favour with investors. I don't quite agree that it is a responsible Budget. I think the assumptions on revenues are high, the direct tax surcharge is retrograde and there is no incentive to start the growth engine in the economy.
I don't think the Budget does enough for growth. The Budget will probably falter in its estimates on revenues, which seem aggressive to me. They will also fail to stimulate economic growth. I see the growth slipping and the rupee falling...
I agree that there will be few investors in the world or in India who will feel good after this Budget.
Ajay Srinivasan is managing director, Prudential-ICICI Asset Fund
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