PM Narendra Modi government will present the Union Budget for FY16 (year ending March 2016) on 28 February.
It is likely to be assessed from the following perspectives: (1) the government’s commitment to fiscal consolidation, (2) the quality of fiscal consolidation and (3) whether it presents a roadmap for long-term reforms.
We expect the budget, to be presented by Finance Minister Arun Jaitley to be positive in terms of indicating the government’s commitment to and the quality of fiscal consolidation.
We believe the government will deliver on its FY15 fiscal deficit target of 4.1% of GDP and target a FY16 deficit of 3.6%.
5 Forecasts to Watch :
1. We expect the government to deliver on its FY15 fiscal deficit target of 4.1%; we project 3.6% for FY16
2. Lower crude oil prices, recent hikes in excise tax may provide fiscal space to stimulate public investment
3. However, more radical steps are needed to increase public-sector capex to the levels of five years ago
4. Reforms will likely focus on expenditure efficiency; we will watch for progress on ordinances
5. We forecast FY16 net (gross) market borrowing of c.INR 4.5tn (INR 6.0tn); stay Positive on IGBs
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By Samiran Chakraborty, Anubhuti Sahay & Nagaraj Kulkarni, Macro Research, Standard Chartered Bank, India