The FM was both clear and confident – of what needs to be done, how and when it will be done, and timelines. This is across a spectrum of issues (Fiscal, Growth, Investments, CAD, FII taxation / regulations and GST), and in meeting near-term targets (5.3% fiscal Deficit, GDP growth of
5.7% in FY13).
The market has been cautious leading into what is seen as an ‘election/populist’ budget in Feb 2013; the FM was decidedly more positive. He suggests the fiscal deficit target will be met, taxes will not be raised – the tax regime will be stable, and while policy will and should be biased towards the poor, the budget will offer a lot.
Importantly, there was a lot of focus on the longer term – a 4-5 year perspective: Fiscal deficit – reduce 60bps per year, Infra building – top priority, CCI – Should clear all approval bottlenecks (First meeting in Jan), GST – legislation by December - and is targeting 8% GDP growth in FY15. We highlight specifics inside the note.
GDP target FY14: 6.5-7%. FY15: ~8%
Current account deficit CAD is likely to remain high even in FY14. However, capital flows (portfolio and FDI) should be sufficient to plug the gap.
GAAR Has been postponed till April 2016. The final say on GAAR applicability will be with an approving committee (comprising Chief Justice of High Court/ Supreme Court, an outside scholar and one other). This committee will have the authority to supersede the IT department.
GST Targeting to introduce the bill in the August session of the parliament and get it passed by December. All states are already on board. A report on the design of GST is expected to be launched on 25th January.
