Vote On Account - Ooops... A UPA Report Card

Usually the Union Budget creates a lot of volatility in the equity markets, at least on the intraday basis. Obviously, it has to because it provides a clear picture about the nation’s balance sheet. However if we consider what happened in today's Vote on Account  it was a clear picture of what UPA government has done in the past ten years (successive two tenures). 

It was more of a progress card of UPA Government (as expected articulated in favour of UPA Government) rather than focusing on Indian economy. It was more focused on general elections scheduled in the coming few months, rather than focusing what is the need of the hour, reforms. 

It is true that being a Vote on Account there are restrictions on the Finance Minister. However, it is more about the intent. And, we feel our FM (The UPA Government) lacks intent to bring any kind of reforms in the near future.

The budget speech lasted for more than an hour. In that the FM repeatedly spoke about the UPA Government's achievements. In the last few minutes of the speech he made few announcements which were favourable for the automobile companies, FMCG companies and a few domestic mobile handset manufacturers.
To put the numbers perspective, duty for small cars has been cut to 8 % (from 12 %), a cut to 20 % for large and mid segment cars and 24 % (from 30 %) for SUVs. Apart from that the excise duty has been cut by 2 % for capital goods and consumer durables. Relief has been provided in service tax for rice warehousing and storage. There is no change in tax laws.

Apart from that, there were hardly any changes in the macro economic scenario. However the positives would be like containing the Fiscal Deficit to 4.65 % of GDP and containing CAD at USD 45 billion (from the earlier levels of more than USD 80 billion) for FY14.

In addition the FM also spoke about achieving the 5.20% GDP growth in remaining two quarters (Q3 and Q4 of FY14). But overall it was a dull and tepid session with hardly any intent of bringing any reforms. Though he stated that the government wanted to implement Goods and Services Tax (GST) and Direct Tax Coide (DTC), but did not get support. However, we have been listening to this since few years and hence this statement also does not excite us.  

All in all, it was more of a progress card of UPA than the Vote on Account. It is unlikely to make any major impact on the markets except few of the automobile stocks making some up-move on the bourses.