Budget Analysis: FY13 may see a slow pace of recovery says D&B

Dun & Bradstreet India (D&B) has come out with its detailed analysis on Union Budget 2012-2013. According to the research firm, the fiscal year FY13 is expected to witness a slow pace of recovery in growth, thus entailing lower revenue generation and exacting higher expenditure from the government.

The Union Budget for FY13 is presented at a time when the domestic economy is in the midst of a slowdown with the downturn in the global economic environment further impeding the growth momentum. Measures for boosting demand, especially on the investment front through progressive policy action and at the same time laying a credible fiscal consolidation road map were widely anticipated in this budget. However, the announcements in the Union Budget for FY13 could best be described as workmanlike in nature. Acknowledging that the government has limited fiscal space to manoeuvre, the realistically high fiscal deficit target of 5.1% could ensure that going ahead the economic agents would set their expectations on growth on the right path.

The focus of the government on capital market is a positive given it would accelerate capital generation and funding requirement for the Indian corporate thereby boosting investment. Besides, allowing External Commercial Borrowings (ECBs) to part finance Rupee debt of existing power projects, for capital expenditure on the maintenance and operations of toll systems for roads and highways and also for working capital requirements of the airline industry is commendable as it would ensure securing of funds by these sectors which are facing financing crunch. The biggest disappointment in the budget was that the government did not lay down a strong reform agenda. While it was highly expected that specific progressive policy action would be taken regarding subsidies, FDI, labour laws or land acquisitions, the budget failed to deliver on that front. Moreover, the government also did not set out effective timelines for implementation of the much anticipated Direct Tax Code (DTC) & Goods & Services Tax (GST). Nonetheless, government

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