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Now, that maiden budget of Modi govt has been presented, one may call it a good budget considering the circumstances or an over-hyped budget that lacked big ideas. Here we will not form any holistic opinion on the budget, rather we will discuss its impact on the numbers that matter the most (as discussed in my pre-budget write-up).

Fiscal Deficit: Retained at 4.1% 

The boldest of all steps taken by Finance Minister has been to keep fiscal deficit target unchanged at 4.1%, along with presenting a road-map to reduce it to 3% by 2016-17. This emphasis on fiscal prudence means govt will have to borrow less, thereby keeping interest rates in check, but at the same time, it also means there will no stimulus to GDP. Fiscal deficit is also keenly watched by rating agencies & Govt. seems to have kept their concerns in mind as well.

GDP Growth Rate: 5.4-5.9% (est. for FY 2014-15)

Lifting India to higher growth trajectory has been a major theme of this budget. While the Finance Minister has reiterated government's commitment to take GDP growth rate over 8% in next few years, no detailed road map has been laid down, except for real estate sector. On G.S.T., which is expected to remove structural distortions & proper manufacturing growth, Finance Minister has said its time to implement it, though he has stopped short of giving any time limit for its implementation.

Inflation: 6.01% (May 2014)

Perhaps the most surprising of all was negligible emphasis on controlling inflation, which was one of the biggest poll plank of BJP during election season. Though lower fiscal deficit will automatically help in lowering inflation, as govt will spend less, thereby reducing demand.

Current Account Deficit: 2.1% (est. for 2014-15)

Inspite of having dramatic fall in CAD in last few quarters, Finance Minister remains vigilant on this front. Apart from mentioning it in his speech, not reducing import duties on Gold, Silver etc. also signals the commitment of new govt on this front.

Big 3 subsidies: Rs. 2,51,000 crore

Finance Minister said that subsidies would be more targeted, but there has been no rationalization or any signalling of reduction in subsidy bill. In fact, subsidy bill has been increased marginally as compared to interim budget. This is only going to make Finance Minister's task of achieving 4.1% fiscal deficit target more difficult.

Sensex: Around 25,000

Stock markets seemed to be bit confused on the budget day as to which direction to move. So, its hard to draw any conclusions as to what the reactions of stock market on this budget was.

As said in the initial part of this write-up, we will restrict ourselves only to above mentioned indicators and leave it to the experts as to how, overall, the budget has been.


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Category Others, Other Articles by - Satvir Singh 



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