Markets stay firm ahead of interim budget 2019, fiscal prudence key
Care Ratings said the allocation by the govt on capital expenditure has either declined or remained at almost the same levelAt 10:34 am, the Sensex was at 36,397.19, 140.50 points or 0.39% while the 50-share Nifty was at 10,868.55, up 37.60 points or 0.35%
The market continues to stay firm as investors keep a cautious eye as interim finance minister Piyush Goyal prepares to presents his first and the government's last budget ahead of the general election. Investors are wary if the government will introduce populist measures that could disrupt fiscal prudence.
At 10:34 am, the Sensex was at 36,397.19, 140.50 points or 0.39% while the 50-share Nifty was at 10,868.55, up 37.60 points or 0.35%.
Analysts said the markets are concerned that in the absence of new revenue-boosting measures, lower revenue from disinvestment and shortfall in the goods and services tax (GST) collection, it will be difficult for the government to achieve its fiscal consolidation objectives in the interim budget.
According to HDFC securities Limited fiscal deficit for FY19 may exceed from the budgeted levels by 20-30 basis points (bps) even as the shortfall in revenues could be offset by delaying expenditure including fertiliser, oil and food subsidies (or transferring it to off balance sheet like FCI) to the next fiscal. “Given the current macroeconomic conditions of slowing global demand, low inflation and weak business cycle, not many would object to this relaxation of fiscal targets. Fiscal deficit target for FY20 could be estimated at 3.3% vs 3.1% mandated by the medium term policy framework," it said in a note on 29 January.
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The brokerage firm said that what we need is a responsible political class which acts more prudently from a medium term perspective for the benefit of the nation rather than short term measures to influence a segment of population.
Care Ratings said that over the last six years, the allocation by the Central government on capital expenditure has either declined or remained at almost the same level. “On the other hand, financing via the internal and external budgetary resources has seen a significant increase in absolute terms as well as a proportion of total gross budgetary source (GBS). Given this additional source of financing available with the government, the total capital expenditure allocation must always be read with caution," it said in a note 29 January.
Meanwhile, the government on Thursday revised upwards the economic growth rate upwards to 7.2% for 2017-18 from the 6.7% estimated earlier. "Real GDP or GDP at constant (2011-12) prices for 2017-18 and 2016-17 stand at ₹131.80 lakh crore and ₹122.98 lakh crore, respectively, showing growth of 7.2 per cent during 2017-18 and 8.2 per cent during 2016-17," the CSO said.
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