With the Economic Survey out and the Union Budget 2018 just two days away, Pranjul Bhandari, Chief India Economist, HSBC talks about her expectations.
- She clearly believes the government should stick as closely as it can to the pre-announced fiscal deficit target because it is going to be a delicate years. The oil prices are on a rise, which threaten the macro stability gained over the last few years, she adds.
So, there is no point in being adventurous with the fiscal policy, it might turn out to be too costly, she says.
Talking numbers she says, since FY18 was a year of structural reforms, if the government slips by about 20 basis points and clocks in 3.4% instead of 3.2%, the market may tolerate and for FY19 instead of 3 percent, 3.2 percent would be okay.
With regards to GST collections, she says the government will have to work hard so that the number is robust going forward.
According to her, instead of slipping on fiscal deficit, if the government is able to clean up GST and augment tax revenue collections then there would be enough money to fight rural distress.
GST is the most important piece of fiscal math, which should be the focus for the government, says Bhandari.Talking about the things that could propel investment growth in India she said, one is higher world growth, which is already seeing an uptick. Two is expectations of higher domestic growth – this is also rising on back of some structural reforms. Three is policy certainty –hopefully we may not have more of demonetisation kind of shocks. Four is tackling twin-deficit problem – here the government already has a credible plan like the recapitalization of PSU banks but it needs to happen quickly. All this will help kick-starting investment cycle again in the next couple of years