<b>Naresh Takkar:</b> Committed to fiscal discipline

Budget has attempted to stimulate economic growth through enhanced spending on multiplier sectors

The first Budget after the note ban has remained committed to fiscal consolidation, targeting to reduce the fiscal deficit from 3.5 per cent of GDP in FY17 Revised Estimates (RE) to 3.2 per cent of GDP in FY18 Budget Estimates (BE). Fiscal compression, along with the 11 per cent rise in capital expenditure, bodes well for the quality of fiscal deficit in FY18 BE. However, the ability to meet the somewhat-optimistic disinvestment and strategic divestment (Rs72,500 cr) target and the nominal GDP growth forecast (11.75 per cent) would be critical to achieve the government’s fiscal consolidation plan.

The Budget has attempted to stimulate economic growth through enhanced spending on high multiplier sectors, particularly rural infrastructure, affordable housing and transport. It has also proposed tax concessions to support the ailing MSME sector and income taxpayers in the lowest bracket, at a modest assessed revenue loss of Rs22,000 crore.

The low allocation of Rs10,000 crore for bank recapitalisation is a notable disappointment. ICRA estimates that PSBs require Rs45,000-50,000 crore of Tier-1 capital in FY18. Had the government provided that amount, the fiscal deficit would have been as high as 3.5 per cent of GDP.

The author is MD & Group CEO, ICRA