Indian Budget Proposals:-
India needs to review public spending and improve its fiscal position, Finance Minister Pranab Mukherjee said on Friday, kicking-off the presentation of his budget for the fiscal year that starts on April 1.
Key Points:
* Need to review stimulus
* Challenge to return to 9% growth, then double-digit
* Economy now in far better position than a year ago
* Final FY10 GDP figure maybe higher than estimate of 7.2%
* Fiscal deficit seen at 6.9% of GDP in 2009/10
* Fiscal deficit seen at 5.5% of GDP in 2010/11 (Reuters poll 5.6%)
* Fiscal deficit seen at 4.8% of GDP in 2011/12; 4.1% in 2012/13
* Total expenditure in 2010/11 11.87 trillion rupees (USD 256.75 billion)
* 2009/10 revised estimate for tax collection 7.47 trillion rupees (USD 161.58 billion)
Business Comments:
Ramya Suryanarayanan, Economist, DBS, Singapore:
"They have acknowledged that the 2009/10 fiscal deficit as a percentage of GDP at 6.9% and I think that means actual slippage of 200-300 billion rupees and it is unclear how they fill in the gap.
"The cash levels with the government are currently low and the scope to unwind MSS is also low. The fact that they have pushed up the income tax slab and the expenditure growth is aggressive as expected. This could lead to a 0.5% of slippage in the fiscal deficit in 2010/11 eventually.
Alex Mathews, Head Of Research at Geojit Bnp-Paribas Financial Services, Kollam, Kerala:
"The budget has been quite positive for the market. The partial rollback of excise duty on cement, cement products and large cars is a very good move. Stocks will continue to move up."
A. Prasanna, economist, ICICI Securities Primary Dealership, Mumbai:
"The fiscal deficit target is very much in line with what market expected. In that context, I expect bond yields to remain rangebound. When the actual borrowing hits the market, it will put upward pressure on yields. Borrowing is still a challenge on the back of rising interest rate condition.
Vivek Kumar, Economist, ICICI Bank, Mumbai:
"Focus remains on growth. Good to see the finance commission's recommendations getting implemented broadly. Reduction in deficit and borrowing will be good for the market."
Rupa Rege Nitsure, Chief Economist at Bank of Baroda, Mumbai:
"The budget appears to be quite socially oriented with its stress on rural infrastructure, urban development in housing, food security, financial inclusion, public delivery mechanism etc.
"Confidence for fiscal consolidation doesn't come based on prima-facie assessment of the budget."
Market Reaction:
- The yield on the benchmark 10-year government bond was at 7.80%, off an intraday low of 7.77% and lower than Thursday's close of 7.83%.
- The one-year overnight indexed swap rate was at 4.92/95%, from Thursday's close of 4.88/91, while the benchmark 5-year rate swap was at 6.9950/7.0350 percent, from Thursday's 6.99/7.02%.
- The benchmark stock index was trading 1.8 percent higher.
- The partially convertible rupee was at 46.23/24 per dollar, off the day's high of 46.19 and about 0.4% stronger than Thursday's close of 46.3950/4050.
Background:
- A finance ministry report expects 2010/11 GDP growth at 8.25-8.75 percent and said the FY10 fiscal deficit target can be met by spending curbs despite revenue shortfall.
- India's Central Statistical Organisation estimates GDP growth at 7.2 percent for the 2009/10 fiscal year. Finance Minister Pranab Mukherjee has pegged growth at 7.75 percent.
- India's central bank has raised its projection for wholesale price inflation to 8.5% by end-March and policymakers say it should start easing by July. moreinfo
