Budget Reactions: Budget revenue, divestment targets cheer: India Ratings

Devendra Pant
India Ratings

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While the Union Budget 2013-2014 is slightly optimistic in tax revenue targets, a closer scrutiny of individual tax revenues reveals that the aggregate slippage in tax revenues will be minimal. However, the targets for non-tax revenue and disinvestment are optimistic.

At the core of the budget proposals is real gross domestic product growth assumption of 6.1%-6.7%.  India Ratings believes, in light of present global and domestic macro-economic scenario, growth is likely to be at the lower-end of the range.

The subsidy allocation in FY14 budget is in line with the petro price reforms undertaken by the government and subsidy for sale of decontrolled fertiliser with concession to farmers’ points towards fertiliser sector reform in FY14. The budget also allays the fear of a populist budget before the next general election. India Ratings believes that expenditure control, similar to FY13, could help government achieve FY14 budget targets.

The budget has a few proposals to revive investment sentiments and improve savings. However, India Ratings believes resolving pending issues such as land acquisition, environmental and project clearances will have a bigger impact in investment revival.