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This article was first published 9 years ago

Budget has nothing to boost capital markets

July 11, 2014 12:52 IST

Image: Industrialists watch the live screening of the Union budget 2014-15 speech at Taj Hotel in Colabua on Thursday. The screening was organised by the CII.
Photographs: Arun Patil/Reuters Rupa Kudva

The absence of domestic capital market enhancing measures is surprising considering the pervasive funding constraints in the economy.

This may seem to be a Union Budget of many small steps, but a deeper evaluation does show the themes of urbanisation and infrastructure, job-creation and promotion of entrepreneurship, besides the increase in foreign direct investment in defence and insurance.

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Budget has nothing to boost capital markets

Image: The g
Photographs: Reuters

But, it appears to have given the domestic capital markets a miss.

The gates have opened wider for long-term foreign money but India needs significantly more domestic wherewithal to achieve and sustain the stated objective of 7-9 per cent growth. 

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Budget has nothing to boost capital markets

Image: Economic growth is likely to get hampered due to lack of measures for the capital markets.
Photographs: Reuters

The absence of domestic capital market enhancing measures is surprising considering the pervasive funding constraints in the economy and the social contract implicit in the recent voter mandate of providing faster economic growth.

....

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Budget has nothing to boost capital markets

Image: The government expects to generate only Rs 63,000 crore (Rs 630 billion) this fiscal through divestments.
Photographs: Reuters

This, even as the government is hoping to reduce fiscal deficit through growth than by cutting expenditure.

The government expects to generate only Rs 63,000 crore (Rs 630 billion) this fiscal through divestments. 

...

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Budget has nothing to boost capital markets

Image: Mumbai Airport's T2 terminal.
Photographs: Rajesh Karkera/Rediff.com

So, how will the required raft of infrastructure investments be funded? I hope this imperative is addressed by encouraging safe financial innovation.

To be fair, 45 days is too short a time for big-bang enablers from the government. But we will need them sooner than later.

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Source: source