Rating agency Crisil said that while the fiscal arithmetic laid out in the budget had its positive, the scope for fiscal slippage remained high.

It points out that the tax revenue projections outlined in the budget are too optimistic and no action plan for reducing subsidies was laid out. It draws attention to the high possibility of an overshoot from the budgeted levels if oil prices rise due to the ongoing strife in Iraq.

Similarly, earlier timelines for the rollout of GST have not been adhered to.

Crisil believes the fiscal deficit is likely to be higher at 4.5 per cent of GDP rather than the budgeted 4.1 per cent in fiscal 2015, unless the government cuts back on expenditure.

Growth in tax revenues

The rating agency said in a note after analysing the budget that the budgeted growth in gross tax revenues at 17.7 per cent implied a tax buoyancy (percentage increase in tax revenue for every 1 per cent increase in GDP) of 1.3 – which is higher than the last 10 years’ average of 1.0 and too optimistic given the muted GDP growth expectations (5.4-5.9%), no increase in tax rates and cuts in excise and Customs duties.

It also points out that the expectations on Customs and excise duties are aggressive as these are budgeted to grow at over 15 per cent, up from less than 6 per cent growth last fiscal.

Revenue targets

Crisil said that the revenue targets rely heavily on disinvestments, which have been budgeted at Rs 58,425 crore and this was almost equal to the cumulative disinvestment in the last three years. To meet these targets in the remaining nine months of this fiscal, the government needs to start the disinvestment process right away and capitalise on the current market buoyancy, it said.

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