The hype and market expectations created by the unsolicited public sector disinvestment road map released last week by Morgan Stanley, followed by the government's own pre-budget economic survey, have fallen flat. Instead, the finance minister, Pranab Mukherjee, emphatically said the public sector would remain under the public control. This has naturally upset market speculators who have been hungrily waiting for PSU stake sale ever since the Congress-led United Progressive Alliance government dumped its association with the Left parties.

The Sensex or the 50-share index of the National Stock Exchange (Nifty), which tanked 200 points, reacted adversely to the budget proposals more in frustration than in any real fear of any kind as there is no immediate move towards PSU disinvestment and financial sector reform, meaning bank denationalisation and higher private participation in the insurance sector, on the part of the government. This writer had, in his column, had mentioned the probability of the government not resorting to any immediate radical programme for PSU disinvestment and the financial sector reform for two key reasons - political exigency arising out of the disapproval from the UPA's two important allies, Trinamool Congress and DMK, of PSU disinvestment and the extremely matured handing of the recent global market and financial meltdown by the country's public sector banks and financial institutions.

Fortunately, the reaction of the corporate sector to the budget proposals is predictably positive and radically different from that of the stock market, which failed to see the big picture. The budget's rural thrust and its huge allocation in the rural sector, including in infrastructure, housing, irrigation, education and employment generation schemes, is expected to generate a large demand of all kinds of goods and services. The latter will have a strong positive impact on the corporate top and bottom lines, taking advantage of the expanding rural market. With nearly 65 per cent of India's population living in the rural areas, companies geared to exploit the additional demand in the rural market, especially for consumer goods, are going to witness encouraging growth in their top lines. The rural-centric government expenditure is in the long-term interest of the country's economic growth and social stability. Simultaneously, the government's assurance to the PSU management is expected further boost the performance of this important sector.

The budget also provides several direct sops to the corporate sector, including the abolition of the fringe benefits tax, surcharge on income-tax and commodity transaction tax, extension of tax holiday for commercial production of hydrocarbon and exemption from the payment of advance tax by small business enterprises. The budget, for the first time, has explicitly expressed the government's confidence in the management capability of the corporate sector head honchos, who may now be invited to undertake responsibility to implement and run vital national projects. Thus, the corporate sector officially received the tag of the 'partner of progress' in important government economic initiatives.

The public sector confidence is an all-time high as the post-budget movement of some of the top PSU scrips and bank shares showed. As the budget does not tinker much with the existing excise and customs duties and chooses to maintain its current foreign investment policies, it is unlikely to have any negative impact on the domestic production and foreign direct and indirect investments. The immediate stock market reaction apart, the budget will help boost the growth of the corporate sector. (IPA)