Our's may be the second fastest growing major Economy but the truth of matter is our Growth doesnt rely much on high technology, scientific advance led productivity enhancement or a demand for the medium to luxury category products. As a modern day city dweller with taste for brands and ability to own them as well we miss out on the essence of this nation. Its so massive and diverse with amazingly large land area that its difficult to assess sitting in 150 sft room in Metro like Hyderabad the plight or the life of a similar human being in a village in UP leave aside the entire North East India. That is where a Lifebuoy soap still matters or may have just become affordable for some while here Dove and Vivel di Wills and upwards are the brands more sort out for.
100 cc bikes or Maruti 800 which may get replaced by a Nano are still the largest selling vehicles. This precisely is the difference in us and the US. Where the slowdown has taken a huge toll on demands for hi-tech phones, computer books, IPODs and SUVs. But all these in India arent the ones which are most sort out for. The problem here are food security, affordability and want for scaling up the lifestyle. Hence while the US financial system is in doldrums and they are trying to kickstart the economy by preventing bank failures, Pranab Mukherjee decided that best way for India is to stimulate demand for the same old products like FMCG goods, 100 cc bikes and Maruti's while trying to prevent any massive failures on agriculture side. Its a fact that all the global demand led growth we witnessed over last few years like software, car exports, ancillary exports, textiles etc. arent going to grow till problems in the US and Europe are over. Hence there isnt really large incentive for us to put money where its worth isnt visible right away. To kickstart the economy India needs that the demand should arise wherever it can come from and grow manifolds in the hope that tomorrow everything gets better elsewhere as well. This will automatically make these export oriented industries come up again.
Demand for office space and residential space is down considerably hence his action of not providing any significant sops to realty sector looks correct. Demand in end user driven 5-20lk or even 30lk housing remains buoyant. This is real India. Everything will get better for this sector when the domestic and global growth engine starts again. It can also happen that you take a longshot at Indian economy and wish that when you get up tomorrow we transform into a developed nation with needs for higher quality products only. On his part he has promised more money to roads and power. What is needed is that this happens. He has kept tax benefits for R&D and widened the net of companies which can avail these benefits. He also satisfied the wishlist of many like scrapping of FBT and announcing implementation of rolling out of GST. I think it will be the action and the intent which will count rather than the speech. I also think he put in the budget speech what all is achievable in the next year or in next two years and didnt make too futuristic statements.
I feel he is right in giving money in hands of people who can bring us back to growth path by creating demand for same old age, TV's, mobiles, clothing, small housing, FMCG goods and bikes. If whats assumed happens it will have a multiplier effect as even these sectors have slowed down and are piling up inventory. A demand from one sector will hopefully create demand for output of other sectors which may not directly benefit from this budget. In the time being the advanced economies would have solved their problems and this shall bring back the absent demand. Our aim should be that lifestyles in India change and demand for better products emerge which are provided at reasonable prices. Otherwise in every slowdown we will have to keep going back to same solution of bringing up rural demand. The base of pyramid.
What I am really missing in this budget is reforms in education and healthcare. I am really worried about these two sectors and everyone should have similar worries, because if nothing is done soon to address the expected huge demand for these we may be looking at severe unemeployment, technology retartednes, lack of competitive edge and poor health. The FM should give a broad picture of his fund raising plans as well may be not today but definitely soon to kill any speculation about Country's balance sheet. Because at the end of the day excessive leverage caused the massive slowdown abroad, thus our country can not be prone to such excesses on national level.
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