Finance Minister, Mr. Pranab Mukherjee’s speech on the Union Budget was a continuation of his last year’s policy of improving the fiscal health without disturbing the growth momentum of the economy. Accordingly he expects the GDP to clock a growth of 9% while the fiscal deficit is expected to be reigned in at 4.6%.
Despite strong headwinds on the fiscal front, the FM has not implemented the widely anticipated hike in basic excise duty to raise resources. While the thrust of the budget has been to continue with infrastructure and agriculture lead growth, a slew of measures like lowering market borrowings, continued divestments, allowing foreign nationals to invest directly in domestic mutual funds, status quo on the excise duty structure, efforts to deepen the corporate bond market through augmenting FII investments limits and reduction in the corporation tax surcharge should give Corporate India a much needed fillip.
However the big concern in light of the rising crude prices and spiraling food inflation is the allocation to subsidies which we believe are very conservative and should be much higher than those estimated.