Market crash doesn't reflect Budget quality: PM's Economic Advisor
What's the story
Sanjeev Sanyal, the Economic Advisor to Prime Minister Narendra Modi, has downplayed the recent stock market crash. The market fell nearly 2% after Finance Minister Nirmala Sitharaman presented her ninth consecutive Union Budget. The decline wiped out nearly ₹10 lakh crore in investor wealth. However, Sanyal said this shouldn't be seen as a reflection of the budget's quality or impact.
Market dynamics
Short-term volatility shouldn't be a concern
In an interview to NDTV, Sanyal stressed that markets are inherently volatile and a single day's reaction doesn't determine the long-term impact of a budget. He said, "Markets naturally move up and down," and added that short-term volatility shouldn't be a cause for concern. This perspective comes from his over 25 years of experience in financial markets.
Budget analysis
Fiscal consolidation major achievement
Sanyal described the Union Budget as a "workman-like" exercise focusing on structural and process-oriented reforms. He highlighted fiscal consolidation as a major achievement, especially after government debt surged post-COVID-19 pandemic. The advisor said the fiscal deficit is being reduced gradually and is expected to reach around 4.3% in the next financial year, with plans to go below 4% in subsequent years.
Debt management
Debt-to-GDP ratio on corrective path
Sanyal also said India's debt-to-GDP ratio is on a corrective path, currently at about 56% and expected to fall below 50% by the end of the decade. He emphasized this progress is noteworthy as many countries, both developed and developing, are grappling with high levels of debt. This statement highlights India's fiscal discipline amid global economic challenges.
Reform strategy
Incremental changes often drive meaningful reform
Sanyal stressed that meaningful reform often comes through incremental changes, not just big headline-grabbing ones. He said process reforms are essential even if they don't look dramatic at first glance. Referring to the Budget documents, he pointed out many small but important changes like customs system reforms to expedite imports and exports using advanced scanning technologies for smoother clearances.