We believe this may have been only the first of events where the pace of change disappoints the markets immediate expectations, Credit Suisse said in a report, adding that positive underlying trends were still there in the markets. We believe the market is likely to be driven by news flow over the next six months.
According to Credit Suisse, investor sentiment was rife that professionals and technocrats would be included in the council of ministers, while there were also expectations about new allies and ministries being merged.
Meanwhile, the finance ministry has begun a thorough review of the fiscal deficit target for FY15 and the fiscal consolidation plan as part of the Budget making exercise.
We are going through the data based on the actuals for last fiscal and the targets prescribed in the interim Budget. If required, there may be revision of the fiscal deficit target in the Budget based on discussions with the finance minister, said a senior official.
The plan is to get a more realistic look at government finances and chalk out fresh goals. There was a partial improvement over the revised estimates for fiscal deficit in FY14. While the medium term fiscal strategy can be looked into later, the more immediate need is to finalise target for this fiscal, said the official.
In the interim Budget presented in February this year, the government had projected the fiscal deficit at 4.6 per cent in FY14 and 4.1 per cent in FY15. The actual data for FY14 , however, shows the fiscal deficit at about 4.57 per cent of the GDP.
As part of the exercise, the finance ministry is also reviewing targets for tax collection, non-plan and capital expenditure as well as the subsidy bill.
The fiscal deficit targets will be included in the Union Budget that is likely to be presented in the first week of July.
Finance minister Arun Jaitley is also understood to have discussed at length the fiscal deficit targets with ministry officials on Tuesday, when he took charge at North Block. According to sources, the need for fiscal consolidation was also a part of the presentation made by the department of economic affairs to the new minister.