February 02, 2017 / 12:55 IST
Fiscal math: Tax revenues credible; cash destroyed due to demonetisation not factored inFY17 fiscal target of 3.5% of GDP was comfortably met. Higher-than-budgeted tax revenue was channelled into rural spending and infrastructure such that development spending grew a robust ~20% YoY. For FY18, fiscal math looks quite credible. Gross tax revenue growth is projected to normalise to ~12-13% YoY in FY18 from 16-17% growth in FY16-17 as oil tax tailwind recedes. Non-tax revenue too looks achievable.
Fiscal policy: Fiscal impulse negative; affordable housing boost, tax cuts to help activity Going into FY18, fiscal impulse remains broadly negative. Aggregate spending slows down markedly to 6-7% YoY versus 12-13% seen in FY17. In line with this, development spending slows down to 12-13% growth versus 20% in FY17, with rural spending and infra spending taking some brunt. However, a big thrust on affordable housing (higher allocation to rural housing, tax incentives for builders) along with tax cuts for lower income households and small businesses clearly stands out.
Sectors to benefit Boost to affordable housing and higher disposable income in the hands of urban middle class are the key highlights. Sectors that stand to benefit include paints, tiles, plywood and cement as also low-ticket urban discretionary items (bulbs, white goods and two wheelers).Disclaimer: The views and investment recommendations expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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