The market's negative reaction to budget is no indicator about the outcome of the budget, Sanjeev Sanyal Economic Advisor to Prime Minister Narendra Modi, told NDTV today in an exclusive interview. The markets had dropped on Sunday soon after Union finance minister Nirmala Sitharaman presented her ninth consecutive budget -- a situation that was interpreted by the Opposition as a clear example of how this was a disappointing budget.
The 2 per cent crash that wiped out nearly Rs 10 lakh crore of investor wealth, was read as a sign that Sitharaman's Budget proposal to hike transaction tax on stocks had spooked investors.
"Well, markets go up and down," Sanjeev Sanyal told NDTV.
"If you are going to look at the market reaction of the last 50 budgets, it is not at all clear that the response on that particular day is an indicator of how things panned out. So as somebody who spent a quarter of a century in financial markets, I don't get too worked up about movements in financial markets on any specific day," he added.
Sanyal described the budget as a "workman like" exercise that took care of processes that "economists get excited about" but are not appreciated by many people.
As example, he cited the fiscal debt that had gone up since Covid and has been extremely difficult to bring down.
"It has now been broad bound systematically and you can see that in the coming financial year, it will be back to about 4.3 per cent. We will have it hopefully in the next few years below 4% which we are well on way to doing that," he said.
"Meanwhile, the debt to GDP ratio is now on course to now it will be about 56 per cent but I think by the end of the decade, it will be again below 50%. Now this is no small achievement in a situation where worldwide, both developed and developing countries are seeing their debt to GDP ratios basically out of control," he added.
What most people understand and prefer is big bang reforms, which does not happen every year. "A lot of reform is about process reform. It's the boring nuts and bolts of reform. So if you look at the budget, and not just the budget, look at the document itself, not the speech, you will see there is a large number of small changes," he said.
In this context he cited the customs system, where many small reforms have taken place to smooth out the process.
"Whether it's creating, you know, an X-ray type of system, which will allow both imports and exports to pass through relatively quickly. There's also on the income tax side, there were all kinds of small rules that were frictions in the system, very often used, by the way, for harassment and rent-seeking by tax officials," he added.
