The immediate reaction can cloud one's perception. This is a highly bullish budget for Indian industry but the stock market took an immediate and possibly myopic view of things. When the market fully digests the proposals, it will rebound with a vengeance creating a platform for a new bull phase. The drop in the market has strengthened it technically. This is why the budget is a trendsetter. Whereas the previous budgets over the last few years were instrumental in seeing a drop in customs duties and the consequent increase in the supply of foreign-made goods, mainly in the white goods and consumable sector the current budget has done something dramatic, but in a subtle way. It has raised customs duties selectively by 8 per cent.

Added to the eight per cent devaluation of the Indian rupee over the last few weeks, this immediate effective protection works out to 16 per cent and where it matters. This means that Indian industry will earn more, will be able to use itsimproved cash flow to plough back into its assets, create economies of scale and use the consequent drop in the costs to emerge internally and globally competitive thus improving the export earnings also.

The budget has in a single stroke made it possible for Indian industry to benefit from its biggest single advantage: selling to one of the biggest consumer markets of the world for the last few years we were enabling a number of international companies to come in, exploit the Indian consumer base and kill Indian companies. The budget will now put an end to that. The principal beneficiary of this system will be the Indian stock market. The market plays on fundamentals and prospective earnings of companies.

The budget will now make it possible for Indian companies to earn more and in turn enable them to quote a stronger market capitalisation. This cannot but benefit the Indian investors. There is another reason why this drop will soon correct itself and turn into a rally.

Marketmen will realise thepositive implications soon: Raising the income tax exemption limit will create a bigger disposable surplus. So will the standard deduction. The increased investments for infrastructure expansion and education will increase demand.

In the medium-term there is another point which appears to have got overlooked. The permission of foreign investment into Indian debt will inevitably lead to funds being deployed in the lucrative badla market.

Foreign funds used to getting a return below 10 per cent internationally will begin to get deployed in the Indian markets where the rate of return will be considerably higher. While the international investors will get a considerably higher return, the Indian stock markets will see the entry to large-scale financing which could lead to reasonable and stable rates of funding. That the share buyback did not get a mention appears to have panicked the markets. The finance minister did make a mention that the share buyback would be raised in appropriate circumstances,which removes a big uncertainty. In my opinion, this budget will be remembered for kickstarting a bull market based on the optimistic forecast for Indian industry.