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Monday, 25 January 2021

Budget - the next media spectacle

The next few days will see a lot of volatility. The annual budget is around the corner and although in most years it is a damp squib, yet all financial “experts” will spend or have already spent a great deal of time to tell the finance minister what to do or ask for favours from her. Most of it is a waste of time. So, productivity tip number one. Just skip over any pre-budget discussion in the newspaper or TV channel.  

The budget is not supposed to be a spectacle. And perhaps it wasn’t before the tyranny of the 24x7 media cycle. Now, the TV channels need something to talk about and they keep moving from one event to another. The only worthwhile thing to do for the budget is to either listen to it or better still read the synopsis in the next day’s newspaper. Everything else is a waste of time and effort.

The budget should not even be an event. Previously, people were interested in the tax measures announced in the budget. Now, the major part of it has moved under the GST council and the budget will not have anything to really say about indirect taxes. Direct taxes should not be tweaked every year so maybe once every five years there should be some minor changes to it.

The rest is all accounting. And boring. Because we all know that a lot is being left out and is financed through off-balance-sheet routes. That’s how it has always been. 

Yet, markets become volatile before budgets. People try to pre-empt different policy decisions and sectors or companies that are likely to benefit or lose out and then take positions accordingly. Some people sell and lighten up their portfolios due to event risk. The thing to remember is maybe once in many years we get a budget where some path-breaking decisions are taken. Rest of the time it’s just volatility. And for investors focused on holding businesses for the long term, it is just noise. The best thing to do is to ignore it.

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