GET Stock QuotesNews18 APP
News18 English
Powered by cricketnext logo
»
2-min read

Fitch Says Budget Targets Achievable, Signals Gradual Reforms

Most of the fiscal and revenue targets set in the Budget are achievable and it reaffirms the government intent of gradual fiscal consolidation apart from signalling continued commitment to broad-base the reform agenda with a greater focus now on widening the tax base, says the global rating agency Fitch.

Press Trust Of India

Updated:February 3, 2017, 6:44 PM IST
facebookTwittergoogleskypewhatsapp
Fitch Says Budget Targets Achievable, Signals Gradual Reforms
Finance Minister Arun Jaitley with Budget documents (Photo: PIB)
Loading...

Mumbai: Most of the fiscal and revenue targets set in the Budget are achievable and it reaffirms the government intent of gradual fiscal consolidation apart from signalling continued commitment to broad-base the reform agenda with a greater focus now on widening the tax base, says the global rating agency Fitch.

The Budget reaffirms fiscal consolidation even though the target for reducing fiscal deficit to 3 percent has been pushed back by another year (second in four years), the agency said, but noted that the general goal of addressing relatively weak public finances over the medium-term is still in place.

"The decision to raise deficit target to 3.2 percent of GDP, from 3 percent, means slower near-term consolidation than was previously planned," Fitch Ratings director for sovereigns Thomas Rookmaaker said in a note.

"Most of the Budget assumptions are achievable. The budget forecasts a nominal GDP growth of 11.8 percent, and tax revenue growth of 12.7 per cent. The subsidy bill is set to be stable at around 1.6 per cent of GDP, leaving the bulk of consolidation to come from cuts in other expenditure like defence spending," he said.

He feels the government is focused more on bringing more of the large informal economy into the formal sector by widening tax base and hence the absence of details about labour reforms and the abolition of the FIPB.

"But a significant increase in tax compliance can happen only in the next few years, given the difficulties involved in achieving it. The fact that income tax still does not apply to the farm sector, which accounts for nearly 50 percent of employment, will also limit the potential effectiveness of measures to raise income tax," he said.

On the highest-ever divestment target of Rs 72,500 crore, he said it looks optimistic, having missed this all these years. Also there is a risk that government will need to allocate more than 0.06 per cent of GDP to recapitalise banks.

On the Budget proposal to lower public debt, he said the government should follow new fiscal framework recommended by the FRBM panel that called for the general government debt be brought down to 60 per cent of GDP by 2023, from nearly 70 percent of GDP in the outgoing year. If brought down to this level, it will take the debt closer to the median of 40.6 percent for BBB rates sovereigns range (India has BBB-/stable), he said.

"This would imply general deficits, including other public entities like states of around 6.5 per cent of GDP, which is also much higher than the 'BBB' median," he said.

He believes that the 3.5 per cent fiscal deficit target for this year will be met, "but there is a small risk the final outcome will be higher due to the impact of note-ban." But he did not say by how much.

Read full article
Loading...
Next Story
Next Story

Also Watch

facebookTwittergoogleskypewhatsapp
Most Active
Company Price Change %Gain
Reliance 1,136.40 0.58
Zee Entertain 462.70 -7.80
Yes Bank 179.00 -1.10
Sun Pharma 433.45 2.97
ICICI Bank 362.25 1.06
Company Price Change %Gain
ICICI Bank 362.35 1.22
HDFC 1,953.15 -0.31
Infosys 676.35 -2.48
Sun Pharma 433.10 2.98
Yes Bank 178.90 -1.21
Top Gainers
Company Price Change %Gain
Sun Pharma 433.45 2.97
Bajaj Finance 2,532.20 2.34
Power Grid Corp 196.35 1.97
M&M 770.95 1.93
JSW Steel 305.45 1.87
Company Price Change %Gain
Sun Pharma 433.10 2.98
Power Grid Corp 196.65 2.16
M&M 770.80 1.62
Vedanta 208.90 1.58
Asian Paints 1,354.45 1.47
Top Losers
Company Price Change %Gain
Zee Entertain 462.70 -7.80
UPL 743.65 -3.18
Infosys 676.60 -2.56
Tech Mahindra 709.00 -1.49
Wipro 335.05 -1.34
Company Price Change %Gain
Infosys 676.35 -2.48
Wipro 335.40 -1.29
Yes Bank 178.90 -1.21
ITC 278.00 -0.75
HUL 1,841.10 -0.56

Live TV

Loading...
Countdown To Elections Results
  • 01 d
  • 12 h
  • 38 m
  • 09 s
To Assembly Elections 2018 Results