The arrival of the monsoon and the national budget are famed to move India's financial market like no other annual events. Delayed rains have caused much nailbiting this summer. So has today's budget.
Expectations are running high that a new government - barely two months into the job - will usher in a new era of fast-paced economic reforms to spur economic growth in Asia's third largest economy. Giddy market predictions have the Sensex, the benchmark index of shares on the Bombay Stock Exchange, climbing towards 21,000 points from 14,650 in the months ahead.
Nonetheless, today's national budget has almost as much chance of disappointing as a bad monsoon. To confound some of the more bullish market analysts Pranab Mukherjee, a finance minister who last served in the job under Indira Gandhi, the slain premier, will shower his gifts on the poor rather than the business elite and international investors.
The woes of the global financial crisis and the threat of terror strikes in one of the largest emerging economies are all but forgotten. But the Congress party will be reminded of the legions of rural voters who returned it to power.
There are many good reasons for Indians to feel optimistic, even triumphant.
The mood has steadily lifted since the Congress party's unexpectedly decisive victory in parliamentary elections, trouncing its rival Bharatiya Janata party. A strong mandate for a secular alliance, rather than a fractured coalition and divisive politics, offers the chance of real reform under the leadership of Manmohan Singh, the prime minister.
Some economists already detect a sharp contrast with Mr Singh's first term. Subir Gokarn, chief Asia Pacific economist for Standard & Poor's, the ratings agency, says the ease with which the government pushed through a near 10 per cent rise in fuel prices last week shows a freedom of movement, now the ruling party has shed links with far left political partners.
There are also signs that India's economy is defying the global downturn.
The government, in its annual economic survey, predicted last week that economic growth could rise to near 8 per cent this fiscal year, way above independent estimates of nearer 5 per cent. This latest official forecast puts Indian growth expectations almost on a par with China, which has outpaced India for years.
Indian domestic demand has held up in the face of the global downturn. Rural India, where most of the 1.2bn population live, is continuing to spend. Vehicle and motorcycle sales by Hero Honda and Maruti Suzuki, an indicator of the health of the rural economy, remain buoyant.
Pro-reform business lobby groups have been tantalised by the economic survey and the post-election president's speech, both of which have set out ambitious, market-friendly medium-term goals. Business federations have trumpeted wish-lists for Mr Singh's first 100 days in his second term, hoping to stir the government to sell stakes in public assets, rationalise subsidies, restructure the tax system and reform pensions, insurance and retail sectors.
Against such desires, Mr Mukherjee is almost bound to come up short. One of his top priorities will be convincing that he can exercise fiscal control. His government has launched a raft of stimulus measures to defend high growth and support a depressed manufacturing sector, never mind an armada of structural reforms.
Gautam Thapar, chairman of the Avantha Group, an industrial conglomerate, has modest expectations of today's budget. He says Mr Mukherjee is likely to concentrate on support for infrastructure development and agriculture.
"Speedy institutional reform is not the mandate that they were elected on. The government doesn't see [its job] as that," Mr Thapar warns.
The ebullience is admirable in a nation emerging from the horror of last year's terror strike on Mumbai, its financial capital, and the global liquidity squeeze. Yet, as with the monsoon, premature celebration of reform in India is unwise.
Source : FT