As finance minister rises to present his second Budget, his message will be clear - the government will stick to its commitment to pursue the path of fiscal consolidation. This budget may also end up being a 'Make in India Budget' with the government announcing definitive steps to boost manufacturing.
At the World Economic Forum in Davos, CNBC-TV18s Menaka Doshi caught up Godrej group chief Adi Godrej to understand his expectations from the Union Budget that Finance Minister Arun Jaitley will present next month.
As at the end of November 2014, the fiscal deficit had reached 98.9 percent of the years budgeted total, which means only drastic cuts in expenditures will enable the finance minister to meet his 4.1 percent fiscal deficit target by 31 March 2015.
According to Keki Mistry of HDFC, though inflation is low, RBI will wait for the Budget see the fiscal deficit number and the Budget fineprint before lowering rates. Lower rates, in turn, may lead to a pick up in housing loan demand in metros, he adds.
Moody's will be watching out for the measures that can help reduce general deficit to around 4-5% level from current 7%. Atsi Sheth says other Baa3 rated nations have a general deficit closer to the 3 percent mark.
Subsidy reforms and the implementation of a 6 percent goods and service tax (GST) are among the highlights, deemed necessary for the country`s fiscal consolidation efforts. But analysts and citizens alike are worried about a resulting spike in inflation.
Bond traders are taking fresh positions after a fall in crude prices globally with Nymex at a 17-month low and Brent at over 2-year lows. "The bond market is reacting to savings due to fall in crude prices," says Ashutosh Khajuria.
Finance secretary Arvind Mayaram said Moody's has noted the uptick in growth. There is an expectation that FY15 growth could be 5.7-5.9%. Due to which, post October, revenue buoyancy is expected to kick in.
Clearly like every rating agency, the concerns raised by Standard & Poors in terms of the India Budget numbers are primarily on two fronts; the economic growth rate expected for current financial and how achievable is the fiscal deficit target.
According to GEPL Capital, the budget was positive & showed the Governments intent to achieve the Fiscal Deficit target of 4.1% in FY15 & control expenditures. Fiscal Deficit prediction is 3.6% for FY16 & 3% for FY17, says the report.