Change in fiscal consolidation roadmap to hurt investor sentiment: UBS report

Government has been under pressure to support the economy but any change in the fiscal consolidation roadmap can hurt global investor sentiment, says an UBS report.

According to the global financial services major, global investors view India favourably not just for its growth outlook, but also because of its robust/stable macro story reflected in falling inflation and stable currency.

"A 0.2 per cent GDP boost is not that material for growth per se. A change in the fiscal consolidation roadmap has potential to hurt sentiment among global investors," it said. While the government can use the fiscal push to revive growth, the quality of government spending (investment vs consumption) matters more, UBS said.

The central government is already walking a "tight-rope" to meet the 2017-18 fiscal deficit target of 3.2 per cent of the GDP. Moreover, it has to make up for the shortfall of 0.2 per cent of GDP on a lower RBI dividend transfer and there is also uncertainty regarding tax collections under GST in the near term.