Speaking on the Budget, Chetan Ahya, MD, Morgan Stanley, said that he was looking for fiscal deficit to come down to 6-7% over the next 3 years. He expected the government to set FY10 divestment target at USD 4-5 billion and fiscal deficit target at 6-7% in the budget. He also expected more clarity on divestment, infrastructure in the budget.” The government should have social agenda that does not drain fiscal resources, “he added.

According to him, the budget would be a neutral event for the market. He didn’t expect much to happen on foreign direct investment (FDI) in retail.
Also read: See Nifty in 4150-4650 range post Budget: Ashwani Gujaral

Here is a verbatim transcript of the exclusive interview with Chetan Ahya on CNBC-TV18. Also watch the accompanying video.

Q: What is your sense, will this be a big bang Budget or is the market just expecting too much and will be disappointed?

A: I think the market will more or less get what it is expecting. We are looking for five things to happen in this Budget. Firstly there will be a comfort given by the government that they will bring down the fiscal deficit to more tolerable level of 6-7% in two-three years. Secondly, we should definitely hear from them on divestment, we are expecting a USD 4-5 billion target in 2010 and with a game plan to say that we will probably raise about USD 40-50 billion over the next five years. So some clarity on what exactly is the big picture plan for divestment. Thirdly, infrastructure spending commitment we are already hearing a lot from the roads minister. I think you should hear something more in the Budget in terms of clarity of how they plan to execute that commitment on infrastructure. Fourthly, it is Goods and Services Tax (GST) which everybody has talked about, I think it is almost well articulated by the government that it will give a clarification on when it gets implemented; more likely April 1, 2010. Lastly we cannot forget that they will have a social agenda but what we would want is a social agenda which is not draining fiscal resources too much. There has already been a lot which they have spent. By our estimate, they have spent almost USD 150 billion in a span of two years pre-elections. So they have already done a lot for the middle class. So not go overboard on the fiscal deficit front while announcing the social agenda.

Those are the five things we are looking for and I think more or less you should get them in the Budget. So my guess would be that it will be a neutral event from market perspective, you get what you have heard of; may not be as aggressive as some would want. For example, in foreign direct investment (FDI) I don’t think there will be much on the retail front done and there is a possibility that they don’t talk about FDI and insurance as well. So that is something, which should probably not happen, so we should rein in our expectations there. But as long as they give the other things, it should be okay.
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