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Budget 2019: Sharp increase in FY19 fiscal deficit could dampen market sentiment

Most experts said the likely increase in the fiscal deficit to some extent seems to have priced in by the market, but if it is a sharp increase then there could be a negative reaction

January 31, 2019 / 07:34 PM IST

As it is an Interim Budget, analysts and economists do not expect much from it.  But as it is a polling year, the major focus could be to boost the rural economy. The Interim Budget will be presented on February 1 and the full budget will be in July-August.

Generally, in every budget, the fiscal deficit as a percentage of GDP (gross domestic product) is keenly watched by Foreign Institutional Investors (FIIs) and institutional investors. It is also one of the main stimuli for the sovereign rating.

Likely higher pre-election spending could pose a risk to the fiscal deficit and would increase debt burden, said experts.

Most experts said this time the government is likely to exceed its fiscal deficit target of 3.3 percent set for financial year 2018-19 due to a shortfall in GST collection. However, some experts opined the government may manage to meet the target.