Tempering the rising expectations from the forthcoming budget, foreign brokerage Credit Suisse today said the options before Finance Minister Arun Jaitley are limited and July 10 will be a "non-event".
"This budget shouldn't matter...There is also limited room for fiscal manoeuvres...We expect the budget to be a non-event for the broader market," it said in a note today. The much-awaited maiden budget of the Narendra Modi government will be tabled on Thursday by the Finance Minister.
The room for fiscal manoeuvres is limited as volatile corporate taxes are at 34 per cent of all taxes and only a small fraction of spending is discretionary, the Swiss brokerage said. Stating that the spillover from the previous year's performance limits the ability to trim fiscal deficit this financial year, it said the roadmap on that front which Jaitley lays down will be of greater interest though it is too early to expect details on it. As for FY15's fiscal deficit number, it said divestment can help improve the situation. The interim budget had pegged the fiscal deficit target at 4.1 per cent of GDP on a projected 19 per cent improvement in tax collection. "FY15 deficit could be raised (above the figure of 4.1 per cent stated by Jaitley's predecessor P Chidambaram), but commitment to deficit of 3 per cent of GDP by FY17 will likely be reiterated," it added.
It can be noted that in the first two months of the current fiscal itself, government's borrowing had touched a whopping 45.6 per cent, while tax mop-up grew at a tepid 3.1 per cent, as the government has front-loaded the subsidy payments, including those that were to be paid last fiscal. The brokerage said some commentary on state-run banks' recapitalisation, laying out a clear roadmap on the way forward for this, will be of help. Similarly, "granularity" on the already-stated plans for rolling out goods and services tax which will integrate the entire gamut of indirect taxes can also help, it added.
Rural infrastructure and agri productivity improvement are other areas where Jaitley should touch upon, it said. Some quarters blame the previous UPA regime for the ills on the economic front and have been expecting a lot from Jaitley's maiden budget.