Out of the cocoon

摘要

More important than the financial details of India's budget is its political message. It signals a shift away from the philosophy of last year's budget, which sought to take India back into the protectionist cocoon of swadeshi (self-sufficiency). The liberal-minded wing of the ruling coalition is now calling the shots, and this makes for better politics as well as economics. The budget on February 27th raised income and corporate taxes by one-tenth in an effort to curb the budget deficit The finance minister, Yashwant Sinha, simultaneously gave generous tax breaks for unit trusts (mutual funds) and housing, and cut interest rates to stimulate industry. This mixed bag helped to send the stockmarket soaring 15% in three days (see chart). Among the buyers were foreign investors who had expected little from the budget.