Finance ministers delivering budget speeches are normally constrained by having to earn more or less what they dole out. So, when Pranab Mukherjee began listing dozens of programmes which were going to receive funding boosts of between 50 and 200%, I was thinking tax, tax, tax must follow spend, spend, spend. But that's not the way the world's working at the moment. We've already seen the Obama splurge, and now India's got its own stimulus special. The idea is that government handouts will boost demand which will boost growth which will boost revenues down the line. If India returns to a 9% GDP growth rate, it should be able to bring the deficit down to a reasonable level, but that's a big If. Meanwhile, Mukherjee must have enjoyed the chance to throw around the freebies.
The market, meanwhile, behaved like a guy determined to score on a first date, and unwilling to settle for anything short of the big bang his friend Mr. Media had hinted was coming his way. Unable to make it to the bedroom, he goes home convinced the episode was a disaster. Reflecting on the evening later, he thinks, "well, she obviously is into long-term stuff rather than one-night stands (reform is a process, not an event), the dinner was fun, if a bit pricey; the goodbye kiss wasn't bad (FBT scrapped, 10% surcharge on income tax out); and she seemed serious when she told me to call her".
Maybe the market will make that call a few days down the line, and it could be the start of a wonderful relationship.