Could Indian Markets Thrive Without the One-Day Mega Budget Event?

Events & Jobs Events

Posted by NewAdmin on 2025-02-04 08:41:36 |

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The Union Budget is one of the most anticipated events on India’seconomic calendar, drawing the attention of the business community andinvestors alike. Every year, the build-up to Budget Day is intense, withinvestors closely watching every word from the finance minister. However, thisheightened expectation often leads to volatile market reactions, which can bean unintended consequence of the event's significant hype.

In contrast to India’s single-day Budget spectacle, severalcountries release their fiscal plans over a longer period, reducing the chancesof sudden market shifts in response to policy changes. For example, in the US,there is no single-day Budget. The President submits a budget proposal toCongress, which is then debated, adjusted, and approved over several months.Similarly, in Brazil, budget proposals are submitted to the legislature monthsahead of time, with ongoing revisions throughout the year. The UK follows atwo-phase approach, outlining spending and tax policies in both the Spring andAutumn. Other nations, including Germany, France, and Canada, also have amulti-month process for their fiscal policies.

While India’s Budget remains a legacy exercise with symbolic andhistorical significance, there has been a growing shift away from restrictingmajor policy announcements to the Budget itself. In recent years, thegovernment has adopted a more staggered approach, rolling out key policyinitiatives throughout the year. For instance, the government announced theentry of private players into train operations and infrastructure developmentoutside the Budget. Additionally, significant reforms in defense and agriculture,as well as production-linked incentive (PLI) schemes, have been introducedoutside the traditional Budget framework. Even the Goods and Services Tax(GST), a major revenue source, is not part of the Budget.

In practice, the Budget numbers often get revised during the yearbased on macroeconomic factors. For example, revenue projections andexpenditure estimates are adjusted depending on the economic situation.Similarly, disinvestment targets tend to be fluid, influenced by marketconditions and government priorities. Even subsidies, such as those for theMNREGA rural employment scheme, may see fluctuations depending on changingcircumstances.

Experts argue that spreading out fiscal announcements throughoutthe year could lead to more thoughtful and timely policy interventions. VivekKumar, Economist at QuantEco Research, suggests that moving away from asingle-day Budget wouldn’t harm the economy. He notes that the Budget isessentially a straightforward statement of government finances, and globalexamples show that fiscal planning can be more effective when spread acrossmultiple events.

Deven Choksey, Managing Director of DRChoksey FinServ, agrees,highlighting the benefits of a more staggered approach. He believes this shiftallows the government to focus on the implementation of policies rather thantrying to pack too many announcements into a single day. Kumar further predictsthat by FY27, India may see a different kind of Budget, possibly focused on afiscal deficit range or a debt-to-GDP ratio target, which would give thegovernment more flexibility in its policy approach.

On the other hand, there are strong arguments in favor ofretaining the traditional Budget event. Proponents point to its role inensuring accountability and transparency by providing a comprehensive overviewof the government's financial plans. The Budget Day also sets the government'spriorities, offering clear guidance to stakeholders and the economy. Chokseyadds that the Budget plays a vital role in stimulating market activity, as itprovides investors with opportunities to respond to new fiscal measures andpolicy changes. For many, these elements remain crucial, making the Budget Daya key event on the financial calendar.

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