Estimate the fiscal deficit to be 5.7% of GDP

Budget 2010-11 Preview

 

Fiscal balances – deciding factor

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q                  We do not expect the forthcoming Union Budget 2011 to dish out any big bang reforms/measures for India Inc

q                  We believe that THE MOST IMPORTANT THING to look for in the forthcoming Union Budget 2011 will be the FISCAL DEFICIT and the GOVERNMENT BORROWING PROGRAM

q                  We estimate the fiscal deficit to be at Rs3.9tn/US$85bn (5.7% of GDP) for FY11. We believe that high fiscal deficit will continue to bring pressure on the G-Sec yields and the market valuations too

q                  We believe that there would be only partial roll back of the excise duties cut in stimulus budget, though a roll back of service tax looks very likely

q                  Pressure points to budget may arise from inability to disinvest PSUs and subsidies. Food and petroleum subsidies may pose serious problems for the government finances

q                  As usual, we are expecting the expenditure to continue on plans, especially infrastructure including transport and urabn infra, energy and health

q                  Hence, some winners of the budget would be infrastructure companies

q                  The banking and financial services companies may turn out to be losers if the fiscal deficit is higher than expected

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