Union Budget 2015: Stanchart sees FM delivering on fiscal consolidation target

Moneycontrol Bureau

Standard Chartered Bank expects the upcoming Union Budget to be positive in terms of indicating the government’s commitment to and the quality of fiscal consolidation. It believes the government will deliver on its FY15 fiscal deficit target of 4.1 percent of GDP and target a FY16 deficit of 3.6 percent.

"Gains from lower crude oil prices (around 0.9 percent of GDP) are likely to provide fiscal space to boost public investment in FY16. We expect higher budgetary allocations towards sectors like roads, rural development and power distribution," says the Standard Chartered note on its expectations from the Budget, while cautioning that significant increase in public spending was unlikely.

Some of the things that Standard Chartered expects the FM to announce:

(Excerpts from the note)

• Reintroduction of custom duties on crude oil, increase road cess to fund road development, and setting of ambitious divestment targets.• Budget reforms to focus on improving expenditure efficiency• Any decision to delay the implementation of the General Anti-Avoidance Rules (GAAR; anti-tax avoidance rules), clarity on an oil subsidy formula, a long-term capitalisation plan to revive the banking system and any announcement about a new monetary policy framework will be well-received.

Standard Chartered feels not all reform announcements will be made in the Budget and it will watch for progress on recently issued ordinances during the budget session of Parliament beginning Monday.