Limited Scope For Radical Budget This Year: DBS


New Delhi: There is limited scope for a radical budget this year, DBS said in a research note today adding that the key thrust areas for the government is likely to be rural development and addressing banking sector’s woes.

“There is limited scope for a radical budget this year, but the broad-based and granular approach is set to continue,” DBS said in a research note.

The key thrust areas of the budget would include rural development, addressing banking sector’s woes and maintaining capex needs, while absorbing the bigger public sector wage/ pension bill, the report added.

According to the global financial services firm, the FY2015/16 deficit target is likely to be met, while commitment to fiscal discipline is likely to be “put to test” in FY2016/17.

“We suspect the odds are stacked against fiscal tightening…,” DBS said in a research note adding that a modest miss on the target to 3.7 per cent of GDP is likely on the cards”.

The government proposes to bring down fiscal deficit from 3.9 per cent in the current fiscal to 3.5 per cent in 2016-17.

Reflecting improvement in government finances, fiscal deficit – the gap between the government’s expenditure and revenue – in the nine months of 2015-16 worked out to 88 per cent of the annual target as against 100.2 per cent in the same period last fiscal, according to official figures.

According to the global brokerage firm, few tax tweaks are on the anvil.

The corporate tax rate is due to be lowered to 29 per cent from the current 30 per cent, while the service tax might also be adjusted higher to 16 per cent from the current 14.5 per cent, the report said.

On the Reserve Bank’s monetary policy stance, the report said that the contents of the budget would be “key to keep the door open for further easing”.

Meanwhile, RBI governor Raghuram Rajan on February 2 left the key interest rate unchanged citing inflation risks and growth concerns, while pegging further easing of monetary policy on government’s budget proposals.

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