All the hair-pulling and breast beating after the mini-budget series, about how the Indian economy will make good the pre-poll doles handed out by Jaswant Singh, makes one wonder if all the people complaining have no home and car loans. Loans are a way to unlock the future economic value that a person will create over his lifetime. If the rates of interest are low enough and alternate investment avenues allow a return higher than the rate paid out as interest, loans are a smart way to leverage future potential. What is true at the individual level need not be untrue at the aggregate level. Has Jaswant Singh not attempted to unlock the future value of the Indian economy in this mini-budget series? The measures are aimed at further liberalisation of the economy and are in synch with the overall direction that India is taking. Why then the angst, is it because it is seen as a pre-poll gimmick? The question to answer is this: suppose the government had four years before the polls would it have done the same? The past week saw more budget proposals that touch the lives of the average middle class person, the weaker sections and corporate India. Some of the budget proposals this past week: 1. Foreign banks can now own 100 per cent of a private sector bank, other private sector investors can hold upto 74 per cent in a private sector bank. Foreign institutional investors (FIIs) can acquire up to 49 per cent stake in a private bank but within the 74 per cent overall foreign investment ceiling. Investors will require credit rating for entering into the Indian banking sector through the FDI route. With the Reserve Bank of India (RBI) set to grant more licences, there should be more action in this sector. There is already movement in the banking stocks, expect some more as banks hike their stakes or identify new take-over targets. 2. Petroleum marketing companies, pipelines for oil and gas, unincorporated and incorporated joint ventures in oil exploration, scientific and technical journals are now under the 100 per cent ceiling, foriegn companies can fully own them. 3. The expected hike in telecom FDI to 100 per cent has not happened in this budget due to concerns of the Home Ministry on security issues. The overheated stock market took this as the trigger to release some hot air that had been building up for the last six weeks. Expect some more volitality in the market over the week.
