Backdrop: Union Budget 2011-12 comes amidst macroeconomic headwinds

Union Budget 2011-12 comes at a time when the Indian markets and economy are facing critical headwinds on multiple issues, both domestic and global:

Inflation at decadal high; Tight liquidity and rising interest rate environment; Stalling of reforms process; Persistently high global oil and other commodity prices

We expect FY11 fiscal deficit to be significantly lower than the 5" name="description">
Backdrop: Union Budget 2011-12 comes amidst macroeconomic headwinds

Union Budget 2011-12 comes at a time when the Indian markets and economy are facing critical headwinds on multiple issues, both domestic and global:

Inflation at decadal high; Tight liquidity and rising interest rate environment; Stalling of reforms process; Persistently high global oil and other commodity prices

We expect FY11 fiscal deficit to be significantly lower than the 5" />
Backdrop: Union Budget 2011-12 comes amidst macroeconomic headwinds

Union Budget 2011-12 comes at a time when the Indian markets and economy are facing critical headwinds on multiple issues, both domestic and global:

Inflation at decadal high; Tight liquidity and rising interest rate environment; Stalling of reforms process; Persistently high global oil and other commodity prices

We expect FY11 fiscal deficit to be significantly lower than the 5" />
Backdrop: Union Budget 2011-12 comes amidst macroeconomic headwinds

Union Budget 2011-12 comes at a time when the Indian markets and economy are facing critical headwinds on multiple issues, both domestic and global:

Inflation at decadal high; Tight liquidity and rising interest rate environment; Stalling of reforms process; Persistently high global oil and other commodity prices

We expect FY11 fiscal deficit to be significantly lower than the 5" />
 
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BUDGET 2011-12 PREVIEW - Motilal Oswal



Posted On : 2011-02-24 00:03:53( TIMEZONE : IST )

BUDGET 2011-12 PREVIEW - Motilal Oswal

BUDGET 2011-12 PREVIEW: "One-off performance" or "One of performance"?

Backdrop: Union Budget 2011-12 comes amidst macroeconomic headwinds

Union Budget 2011-12 comes at a time when the Indian markets and economy are facing critical headwinds on multiple issues, both domestic and global:

Inflation at decadal high; Tight liquidity and rising interest rate environment; Stalling of reforms process; Persistently high global oil and other commodity prices

We expect FY11 fiscal deficit to be significantly lower than the 5.5% budget estimate (BE). Absolute fiscal deficit will be somewhat lower than BE.

Repeating FY11 performance in FY12 will pose a serious challenge in view of (1) ballooning subsidy bill, and (2) no 3G-like bounty.

What to watch out for

- Rationalization of oil pricing/subsidy structure by a combination of (1) customs/excise duty cuts, and/or (2) measured price hikes

- Any steps to reduce the fertilizer subsidy; Aligning direct and indirect tax rates with eventual DTC and GST framework

- Kickstarting the reform engine with implementation clarity on GST and DTC, etc.

- Any specific measure to boost revenues (divestment target, one-time revenue generators similar to 3G in FY11).

Source : Equity Bulls

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