Dear Niveshaks

Our Indian markets have been looking upbeat since the day they gave a thumbs-up to the budget which was presented by our warhorse Mr Pranab Mukherjee last month. BSE and NSE are hovering at their respective peaks and have come a long way since the time they went into a tailspin in 2008. A slight plunge in the sensex after the railway budget by Didi failed to meet the market expectation of government’s doubling its this year’s order for railway wagon, later, paved the way for resurrection when sensex rose by 400 points reflecting the ecstatic sentiment and relief that the finance minister has rolled back only part of the fiscal stimulus in the union budget. The positive sentiments among us, the common Indian middle class, by this union budget were preceded by the populist stand taken by Mamta Banerjee when she ignored planning commission’s advice to raise passenger fares and left it unchanged. But I have my grave concerns about this, given the rot in finances as indicated by the fall in revenue and operating margin of Indian railways in the last one year.

We have finally got the answers to the questions posed in the last month’s issue when Mr Mukherjee picked the cards of prudence and caution to sustain growth as well as to rein in fiscal deficit through his 6th (5 full-scale budgets and 1 interim) budget 2010-11. It was indeed a please-all budget. Through broadening income tax slabs, he has endeavoured to make some 25 million income tax payers, including you and me, happy. We can expect that this move, which is primarily being done to boost consumption, will pull tax to GDP ratio to as high as 11 percent. However, in order to consolidate the fiscal deficit boundary, the policy planners have gone all out to increase custom duty on crude import and excise duty which, I suppose, will have a deep impact on inflation especially on wholesale price index. The hue and cry from oil firms is expected to continue as the decision of freeing oil prices will be taken up by minister of petroleum in due course. So taking all this into consideration, the long term effect of this budget, its salient features, and its expected and imminent repercussions on various sectors along with its comparison with expectations and growth parameters have been discussed in detail as the cover story of this issue.

I, on behalf of the whole team Niveshak, welcome Mr. Manas J Sharma, AVP Abu Dhabi commercial Bank (UAE) as the guest of this issue of Niveshak. In a special session with him, he has talked about the recent challenges faced by SME sector in UAE and implications of global downturn on UAE’s SME. The interview also revolves around the role of SME sector in any economy and the ways with which SMEs are coping with the recession in the UAE.

In the current issue, we have few articles that go around our cover story and supplement it. A different perspective on the rollback of stimulus has been presented in an article by students of NITIE. The growth path followed by India has been criticized a lot as it fails to pass on the benefits to the rural parts of the country. So an article on financial inclusion throws some light on this as well. I hope this issue continues the tradition of Niveshak of bringing the latest insights of finance world closer to you.

Stay invested for the good times ahead.

Happy New Financial Year 2010-11.