Industry Expectations - Budget 2009 - 2010
Budget Expectations from DBS Group Research - India budget: A 'game-changer' or not?
- The new government's much-anticipated budget exercise is scheduled for July 6
- We expect the government to target a deficit of 6.5% of GDP for FY09 (ends Mar10), 1%-pt wider than the 5.5% target set in the interim budget in February, and retain forecasts of 7% and 11% growth in real and nominal GDP in FY09
- Apart from the usual interest over size and allocation of government spending in the budget, this budget is also keenly watched for the tone it sets in terms of the reform agenda of the new government
- We believe the longer run policy and economic outlook is materially brighter. We are optimistic that the budget and the months ahead would see constructive plans, policies and initiatives from the government
- Since the election outcome a month ago, there are many signs that the government is serious about liberalizing policies and delivering inclusive development, and importantly, that it understands the limitations of any new policies if it doesn't pay attention to the constraints on delivery and governance
- However, a game changer, can only change the game so fast in India. The change would unlikely be dramatic - the political and administrative structure do not allow for dramatic change. Therefore, much of the positives are in the longer-run
- In the meantime, widening fiscal and trade deficits make us wary of stability risks in the short-run, especially as oil prices continue to climb. A ratings downgrade would be unavoidable if the government doesn't liberalize oil prices
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Union Budget