Expert views: India budget goes for growth, delays cut in fiscal deficit

Last Updated: Saturday, February 28, 2015, 13:08

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Mumbai: Finance Minister Arun Jaitley on Saturday announced a budget aimed at high growth, saying the pace of cutting the fiscal deficit would slow as he seeks to boost investment and ensure that ordinary people benefit.

Jaitley set India`s fiscal deficit target for the 2015/16 fiscal year at 3.9 percent of gross domestic product and said it would reduce the target gradually to 3 percent by 2017/18, one year later than previously expected.

GROWTH, FISCAL DEFICIT

RADHIKA RAO, ECONOMIST, DBS, SINGAPORE:

"Today`s budget was pragmatic, wide-ranging and inclusive given the emphasis on social safety nets. On the fiscal math, the deficit target has been set at -3.9 percent of GDP, deviating modestly from the roadmap`s target of -3.6 percent.
"But the government reiterated its commitment to medium-term consolidation by maintaining the -3 percent target, but delayed the timeline.

"We had flagged risks of a higher deficit target to accommodate realistic economic assumptions, higher public expenditure and increased devolution to states. The higher target is unlikely to attract the immediate ire of rating agencies and the markets, but will need the higher-frequency fiscal performance to back that faith.

"Rightfully, public investments have been given precedence to kick start the capex cycle, picking the slack from the stressed private/corporate and banking sectors.

"Overall, the budget was positive, but we are uncertain if there will be any imminent rate reaction from the central bank."

A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI

"This budget will be a good test case whether fiscal stimulus works or not.

"If growth picks up more than what is being anticipated by the government, then we can conclude that investment-led growth helps growth. But it is disappointing that fiscal deficit targets have been reworked, and it remains to be seen how successful the government will be in implementing that."

UPSTAND BHARDWAJ, ECONOMIST, ING VYSYA BANK, MUMBAI

"The Budget seems to be more credible, with a higher fiscal deficit target and higher allocation for infrastructure.
"Clarity in taxation structure will provide more stability ahead. The expenditure switching towards more productive areas is a big boost for growth."

NILAYA VAR, HEAD OF GOVERNMENT SERVICES, KPMG INDIA

"Although possibly controversial and against economist expectations, the pushing out of meeting the fiscal deficit target by a year shows pragmatism in bringing in additional public investments for infrastructure development, compensating (for) lack of private investment and showing seriousness on improving overall infrastructure."

ANANTH NARAYAN, REGIONAL HEAD OF GLOBAL MARKETS - SOUTH ASIA, STANDARD CHARTERED, MUMBAI

"Markets were expecting a fiscal deficit target of 3.6 percent to be met in 2015/16, so the 3.9 percent number will be negative for the markets as an initial reaction on Monday.

"Also markets were not expecting the government to extend the fiscal consolidation roadmap by one year, and we were expecting fiscal deficit target of 3 percent of GDP to be met in 2016/17. But we have to see how this additional money coming out of the higher fiscal deficit will be spent."

FOREIGN INVESTMENTS

ENMESH SRIVASTAVA, CHIEF INVESTMENT OFFICER IDBI FEDERAL LIFE INSURANCE, MUMBAI

"GAAR postponement is a big positive and will bring fresh inflows.
"More importantly, they have clarified that when GAAR comes into force, it will not be applicable retroactively, and that clears a big uncertainty for investors."

U.R. BHAT, MANAGING DIRECTOR, DALTON CAPITAL, MUMBAI

"GAAR deferral is a positive relief. Government wants to be sure that foreign investors don`t run away from India. There should be no confusion prevailing on this now.
"It should provide some stability on perception of India`s tax policies. I think there would be a comprehensive review of everything before government actually plans to move to GAAR."

NIRAKAR PRADHAN, CHIEF INVESTMENT OFFICER, FUTURE GENERALI INDIA LIFE INSURANCE, MUMBAI

"Having no distinction between foreign direct investments and foreign portfolio investments would provide more confidence to portfolio investors.
"Both investments would be treated same in the eyes of government and regulators. This should attract more portfolio flows in near to medium term in debt as well as equities."

TAXATION

SACHIN MENON, COO - TAX & HEAD OF INDIRECT TAX, KPMG INDIA, MUMBAI

"The announcement that the much awaited GST will be introduced on 1st April 2016, will definitely rejuvenate the industry.
"The GST will make manufacturing more competitive and thereby support the `Make in India` Campaign. How fast the Finance Minister will move the wheels of change to usher in GST will be keenly watched in the coming days"