Stubborn deficits, optimistic projections?
Barclays Capital | Updated On: March 15, 2012 20:45 (IST)
: Barclays Capital expects the underlying tone of the upcoming Union Budget to be characterised by the same four features as in the 2011 budget: subdued revenues, high and sticky expenses, stubborn deficits, and optimistic government projections.
- They expect the FY12-13 gross fiscal deficit (GFD) to reach 5.2 per cent of GDP, somewhat less than the likely 5.9 per cent in FY 11-12, but still high. In our view, the government’s projection of the FY 12-13 GFD could be in the range of 4.5-4.8 per cent.
- They forecast the central government’s net and gross borrowing through dated securities to be Rs 4.75 trillion and Rs 5.65 trillion, respectively, in FY 12-13 (assuming the GFD is 5.2 per cent of GDP).
- The likely changes in tax rules will mostly be minor adjustments, in our view, rather than a major overhaul, and generally will involve efforts to better align the current rules with the proposed direct tax code (DTC) and the goods and service tax (GST). They think the service tax net will be broadened and excise tax rates could be revised upward by 1 per cent -2 per cent on a selective basis.
- The budget may offer more clarity on the implementation of the DTC and GST in FY13-14. The tone of the budget is likely to remain noncommittal on other reforms, especially after the poor performance of the ruling United Progressive Alliance (UPA) in the recent state elections.
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