IIFL Research & Impact Analysis

list Union Budget 2012-13: ‘Fiscal consolidation = Subdued growth ?’
Expectations were really never high from the budget after the recent electoral drubbing. The need of the hour was a clear roadmap for fiscal consolidation by cutting expenditure and subsidies. Instead, a slew of allocations were made to several schemes in an attempt to be populist.
list Union & Railway Budget 2011-12 Wrap Up: IIFL Research
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list Union Budget 2011-12 - ‘Fiscal consolidation poses major challenge’
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Finance Ministers of India

Pranab Kumar Mukherjee
(1982-1985, Feb 2009-May 2009, May 2009-Continuing)

Pranab Kumar Mukherjee is a prominent leader of India National Congress. He has...
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IndiaInfoline arrow Budget arrow Fund Expectations

Pre-Budget Expectation 2013: Kotak Securities

India Infoline News Service / 02:02 PM , Feb 18, 2013

“The Finance Minister will present the FY2013-14 budget amid high expectations. The initiation of the reforms process over the past 4 months has raised expectations about continuation of the same in the budget. Moreover, the FM has already indicated that this will be a 'Responsible Budget' with FY14 fiscal deficit pegged at 4.8%. Markets are now looking out for an 'achievable budget'.

The FM's priority in the 2013-14 budget will be fiscal rectitude. A lower fiscal deficit will leave more money for the private sector and moderate interest rates. The rating agencies are also closely watching out for any further fiscal slippage. India needs to sustain and improve the strong capital flows of CY2012. We expect the FM to stick to the revised fiscal deficit of 5.3% for FY13 and budget for a 4.8% deficit for 2013-14, based on a nominal GDP growth expectation of 13% in FY14.

The reduction in FY14 target will be achieved by controlling expenditure - both plan and non-plan, we opine. With the given plan expenditure constraints, which may impact growth, the FM will likely rely on private sector to boost investments by giving incentives for the same in targeted areas. However, several initiatives need to be taken even outside the budget to support and promote private investments. Speedier implementation of allocated budgets will make these spends more effective. We believe that, significant stress will be laid on more effective implementation of the outlays rather than any increasing outlays significantly.

Real GDP growth target for FY14 will be set at 6%, we believe. The budget will aim to provide an investment - led supply push to growth (with private sector participation) as against a consumption - led demand pull (higher subsidies, etc). Targets for subsidies will likely be controlled, especially fuel subsidies. However, containing subsidy burden beyond a point may prove difficult especially keeping in mind the high food inflation and rising food subsidy bill. Along with the fiscal deficit, market will focus on the revenue deficit as well, we opine.

WPI inflation for FY13 is expected to average round 7%; much higher v/s the comfort levels. We expect measures towards easing supply constraints, especially on primary articles. We expect a further roadmap for Aadhar-based subsidy distribution. However, we understand that, most supply side constraints can be addressed only in the long term. On the other hand, non-food manufacturing (Core) inflation has already come down to comfortable levels of sub-5%.

On reforms, the FM may signal the Government's intention to move ahead with the reforms process on several fronts. DTC and GST are now expected to be implemented totally WEF FY15 only. However, some enabling measures may be announced. There are several reform initiatives which the Government has initiated outside the budget. The budget may take some of them ahead or announce new ones including Insurance reforms, Pension reforms, etc. Critical issues like labour reforms may need broader political consensus.

We expect stability in tax rates, though there may be some adjustments in the list of exemptions, deductions, etc, keeping in mind the eventual movement to GST and DTC. Tax exemptions on targeted investments may also be announced. We expect the divestment target to be increased to Rs.400bn v/s FY13 target of Rs.300bn.

We do not expect any major initiatives for the stock markets. Any reduction in STT will be cheered by the markets. If Commodity Transaction Tax (CTT) is levied, it will be negative for commodity markets. Thus, we believe that, the focus of the markets will be on fiscal prudence, on effective implementation of investments, and on sectors which are impacted by the budget proposals.

We believe that, the budget may have the following implications for the sectors:

  • Positive for Banking, NBFCs, Capital Goods, Construction, Media, Oil & Gas, Power, Real Estate, Shipping & Logistics.
  • Neutral for Automobile, Aviation, Cement, FMCG, Hotels, Information Technology, Metals”
Dipen Shah, Head of PCG (Private Client Group) Research, Kotak Securities

Janta's Expectations

Posted By: Riyaz Mumbai   |  Feb 26, 2013 11:03 AM
There are hints of a passenger fare hike but freight fare is likely not to be touched.
Posted By: Riyaz Mumbai   |  Feb 26, 2013 10:44 AM
Posted By: deepa Dehradun   |  Feb 20, 2013 06:24 PM
Budget should have something for our area also.
Posted By: Nikhil Mathur Jaipur   |  Feb 20, 2013 03:57 PM
the process of price hikes from various sectors will be continue after the budget ?
Posted By: Kamini Agraval Kanpur   |  Feb 20, 2013 03:53 PM
In Budget, Mr.Chindambaram is the hero in this one act and the nation holds its collective breath as he speaks. Budget don't have to be spectacular or exciting to be significant.
Posted By: Lavanya Rastogi, President - OSS Cube Solutions Houston, Texas   |  Feb 11, 2013 01:45 PM
Be less of an Economist and more of an entrepreneur, Mr. Prime Minister Budget 2013 will come at a time, when the expectations of the aam admi as well as the business wallahs seem to be at the lowest it has been for a decade. Even the diehard optimist and “shining India” backers seem to have accepted the malaise of corruption, social chaos, circus of politics and economic policy paralysis as the New Normal for India. So much so that – any really bold or imaginary move by the bourgeoisie wisemen of GOI may actually catch everyone by surprise enough to send the ever slowing economy into an adrenaline induced shock! If there was one thing I could say our honorable Prime Minister – it would be to advice him to be less of an astute Economist and more of a visionary Entrepreneur. May be you could begin here with budget 2013: 1. Support SME competitiveness by simplifying and supporting expansion of access to credit specially in overseas markets 2. Incentive investment into R&D and Skill building in the knowledge based industries 3. Expand budgetary support for institution of higher learning with real productive partnership with the industry. 4. Make innovators feel welcome – by offering basic sops and a helping hand 5. Invest for the future – in building public institutions that will outlive your generation. As sound as economic analysis with hind sight of 20/20 may be – it unlikely that it will be nearly enough to usher in any change or stimulus with a pace of creative adaptability that the entrepreneurial India deserves so much! Mr. Prime Minister – before you finally hang up your shoes, it’s time NOW for you to choose your legacy. Do you really want it to be about many promises unfulfilled, reforms bungled and believers in you disillusioned ? Or Do you want it to be about Visionary Leadership …that ushered in the Economic equivalent of the Green Revolution? I know it seems so far back in time but there was a time no too long ago when you were credited with “architecting the economically vibrant India” …long before you even ascended to the PMO! After nearly 10 years at the helm, trust me, it wouldn’t really hurt you that much to step up to base and take a couple of courageous swings – if you connect and score a home run – that then will be your legacy, a last hurray! – one you can be proud of and one that you truly deserve. - Lavanya Rastogi, President , OSSCube
Posted By: Raju S A Dubai   |  Mar 18, 2012 02:00 PM
I do not know why we are still having the archaic system of tax rates, exemptions etc. We should just fix flat tax rates as per the income slabs. This will bring down the tax rates but might ensure better compliance.
Posted By: Manu M Surat   |  Mar 16, 2012 01:36 PM
obiously we are expecting to reach a limit of upto 5lacs Excemptions and further to go on 10%, 20% and 30%......
Posted By: M K BHAGAT BHOPAL   |  Mar 16, 2012 10:35 AM
Being a salaried person a expect to increase tax slab .The tax exemption should be 5 Lac and max tax rate shall be 20% above 10 Lacs.
Posted By: Partha Sarathi Paul Kanchrapara   |  Mar 16, 2012 08:36 AM
Being a salaried person, obviously want to get more income slab should be market prices is rising historically...