Overall, this Budget will be a tightrope walk as per Nomura‘s analysis.
Below is a list of key Budget expectations from the report:
-Nomura expects the government to meet its fiscal deficit target of 3.9 percent of GDP in FY16, but expects slippage to 3.7 percent from earlier forecasted 3.5 percent for FY17.
-Quality of fiscal consolidation to deteriorate as wages and pensions rise, while budgeted capex moderates.
- Net market borrowing to rise to Rs 4.8 trillion in FY17 from Rs 4.4 trillion in FY16 and gross borrowing to increase to Rs 6.5 trillion in FY17 from Rs 5.85 trillion in FY16.
- On taxes, Nomura expects an increase in the services tax rate to 16 percent from 14.5 percent and a reduction in the corporate tax rate to 29 percent, from 30 percent, alongside lower exemptions.
Overall, this Budget will be a tightrope walk as per Nomura’s analysis.
Nomura does not expect a “game-changer”, but rather a “run-of-the-mill” budget and the only positive surprise would entail the government sticking to a fiscal deficit target of 3.5 percent of GDP in FY17.