Union Budget Preview - FY16: Sunidhi Securities
The punch line in the Union Budget revolves around the headline fiscal deficit representing it as the government’s proxy for efficiency.
The NDA government in its 1999-2004 regime had an average Fiscal Deficit of 5.34% but Tax to GDP ratio of 8.5%. During 2004-09 UPA 1 had an impressive show with 3.9% average fiscal deficit and 10.6% as Tax to GDP ratio. However in the UPA II tenure between 2009-2014, the fiscal deficit again scaled higher to average 5.3% and Tax to GDP ratio grinding lower to 10.1%.
The efficiency of the central government is expected to see an improvement on two counts firstly, the Fiscal Deficit is seen narrowing to 3.7% in 2015-16 from 4.1% BE 2014-15 and secondly the tax to GDP ratio is seen improving to 10.6% in 2015-16 from 10% in 2014-15.
We expect the savings in subsidy burden mainly due to the fall of crude prices, to be diverted towards capital spending which will help to kick start the investment cycle to some extent though much will depend on reform agenda and policies to push investments into the economy.
The roadmap to implement GST and DTC, steps towards subsidy rationalization, inclusion of suggestions from Expenditure Commission would be keenly watched.
Steps to push “Make in India”, infrastructure investment would define the intent and seriousness of the Govt, says Sunidhi Securities research report.
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