A practical, wide-ranging and inclusive budget: DBS Bank

The Union Budget by Finance Minister Arun Jaitley is “practical, wide-ranging and inclusive” (given the emphasis on social safety nets), according to Radhika Rao, Economist, DBS Bank.

"We had flagged risks of a higher deficit target to accommodate realistic economic assumptions, higher public expenditure and increased devolution to states. The higher target is unlikely to attract the immediate ire of rating agencies and the markets, but will need the higher-frequency fiscal performance to back that fait,” she said.

According to her, focusing on public investments to give precedence to kick-start the capex cycle, and picking the slack from the stressed private/corporate and banking sectors were welcome moves.

Gradual reduction in corporate tax rates over the next four years will also give more breathing space to the private sector and provide tax clarity, she said.

“Service and excise tax increases are positive for collections. GAAR postponement was along expected lines but encouraging as it won’t be retrospective,” Rao said.

“For monetary policy, there is a reiteration that inflation will be in focus under the new monetary policy framework and the RBI (with the policy committee) will seek to keep inflation below 6%,” she added.

This although will not mean an “immediate rate reaction from RBI. “Initial sense is that the budget as a stand-alone might not be enough reason for an immediate rate reaction from the central bank,” Rao said.

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