Comments
Nomura
The unknown is going to be positioning of the Budget with respect to reforms. Whether the Government will come out with more populism to shore up its sagging popularity is going to decide the overall reaction of the market to the Budget, in our view. We remain cautious on the market, underpinned by our concerns on stubbornly high inflation, weakening growth momentum, a sputtering capex cycle, elevated interest rates amid tight liquidity and headwinds to corporate earnings.
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Goldman Sachs
Potentially, the Budget provides an opportunity to move towards fiscal consolidation and to make a bold statement on reforms. However, there are strong reasons that can prevent such a move — elections in 5 States over the summer, elevated inflationary pressures, and governance issues. Moreover, this is a mid-term Budget, and with key tax reforms such as the GST and direct tax code a year away, we do not think there will be many surprises in the Budget.
Standard Chartered
The growing perception that Government policies – or lack of them – have worsened the fiscal situation leaves little room for a significant deviation from the fiscal consolidation path, at least in the Budget. Investor sentiment has already been dented by downside risks to growth and upside risks to inflation.
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Credit Suisse
We will see more in the way of stimulative action than fiscal tightening, although the Finance Minister might still publish a forecast for the Central Government Budget deficit not too far above that of 2010-11. Many of the key budget measures are likely to focus on inflation. We anticipate a sizeable boost to welfare spending, designed to protect the real incomes of the poorest members of society, import duty cuts on some foodstuffs and fuels, and rise in income-tax allowances for those on lower incomes. Additional spending on agriculture, particularly irrigation, is also likely.
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HDFC Securities
The Budget is largely expected to be a tightrope walk for the Government – balancing growth and fiscal discipline. It comes amid a background of high inflation, tight liquidity, scams, the persistent problems of high current and fiscal deficits and a slowdown in reforms and investments. The expectations are low; but if it does not bring in substantial changes to reverse the sentiments, it could be dubbed as lost opportunity.
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Anand Rathi
Budget exectations are modestly positive for almost all sectors except autos. Despite concerns regarding likely increase in fiscal deficit in FY12, we expect cash balance transfer from FY11 to FY12 to improve the fiscal situation substantially.
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KR Choksey
Our assessment indicates that policy endeavour is towards fixing fiscal deficit, current account deficit and governance deficit. Based on industry reports and policy environment, the Government is likely to push economic reforms such as increase in FDI limits in various sectors, and channelise financial savings into infrastructure sector through development of bond market and taxation reforms, among others. On the reform side, GST roll-out and revenue loss compensation structure are key things to be watched for.
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Angel Broking
Looking ahead, we believe an increase in policy reforms and faster project clearances would hold the key for taking the GDP growth rate beyond 8-8.5 per cent. Clearly, in case of most of the economy's current woes, growth is being held back due to supply-side constraints and lack of execution, whether it comes to agriculture, mining or infrastructure. It is important that the Budget shows decisive commitment and clear action on the Government's part to fast-track the removal of all these shackles to our growth so that the private sector can achieve its maximum potential.
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Edelweiss
While expectation is benign for most sectors, the government may try to increase tax avenues. For one, we expect many services to come under the purview of taxation. Second, the government may not extend the exemptions granted to various sectors. The biggest impact could be in IT, wherein we do not expect any extension of sunset clause on tax exemptions for STP. Third, there could be an increase in excise duty within FMCG (especially cigarettes) and auto sectors (additional excise on diesel cars). On the positive side, we see increased allocation in infra and social spending benefitting construction and consumer sectors, respectively.
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Ambit Capital
Given the structural nature of inflation in India arising from supply side constraints and high fiscal deficit, given the political calculus in the run-up to elections and the state of the economy, we expect the Budget to implement a selective fiscal stimulus withdrawal while focusing on appeasing select vote banks. This will mean a greater subsidy bill and a further allocation to rural India.
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Motilal Oswal
Expectations from the budget are, in general, muted. The positive is that FY-11 fiscal deficit target of 5.5 per cent of GDP will be over-achieved. But without one-off revenue sources like 3G, meeting the FY12 fiscal deficit target of 4.8 per cent is a challenge. Clarity on reforms such as DTC, GST and oil/fertilizer subsidy is the key watchout.
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Religare Securities
Budgets in India have increasingly lost market relevance over the years, but this year could be an exception — with an economy reeling under 8 per cent inflation for over a year now, and a 15 per cent market correction on largely macro fears. Fiscal prudence is necessary in the face of stubborn inflation, $100 crude and elections. Responsible fiscal policy at this juncture would not only help in filling up a critical gap in policy-making, governance, and in the continuation of the UPA-II reforms agenda, but this could provide a much-needed directional cue to the market.
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