This budget seems to be a step in the right direction as it promises to take the reform process to the next level and maintain the growth momentum. The budget has appropriately addressed the concerns of the rural and social sectors. These benefits will definitely increase the disposable income of rural population and thereby an increase in demand in the economy. An extended economy and increased purchasing power will certainly create an impact on industry and the services.

As the UPA government, inherited by strong economic fundamentals allowed the alliance to present a balanced budget for the year 2004-05, the Finance Minister seemed very confident about the economic growth. In his budget speech, he articulated that increased production and value addition in agriculture, a marked improvement in industrial production, and continued buoyancy in the performance of the services sector would sustain the growth. The government intends to spend Rs.10,000 cr on rural economy in terms of housing for the poor, basic education and health and completion of irrigation projects. The thrust on infrastructure will give a boost to rural income growth, which will, in turn, create demand for industrial goods.

Amid the increasing FDI limit in sectors like telecom (from 49 to 74%), insurance (from 26 to 49%) and civil aviation (from 40 to 49%) and setting up of the investment commission as a one-stop, experts say that overall the budget is clearly focusing on the encouragement of long-term investment in India. On the reform path, it is another exercise to carry forward the reform thrust. However, the announcement of transaction tax affected the stock market and dragged the indices into a panic. Overall, the budget impacted some of the industries favorably (power, capital goods, cement, fertilizers, petrochemicals tractors, IT, two-wheelers and shipping etc.) However, it also impacted negatively industries like banking, steel, auto ancillaries, commercial vehicles, cigarettes, paper, non-ferrous metals, paints etc.