The Budget does try to balance all the corners and the ultimate test will be whether or not the target of 5.1 per cent for the fiscal deficit will be achieved. The Budget is growth-oriented in a way as the expenditure is focused on infrastructure, agriculture and capital markets (to provide the funds). This will have to help bring about the 7.6 per cent growth in gross domestic product to support the revenue projections.
At the same time, obeisance is paid to the inclusive sectors. In doing so, there could be pressure on prices as indirect taxes have increased as have freight rates before the Railway Budget.
This, along with the higher borrowing programme, will pressure the Reserve Bank of India into taking a call on interest rates as liquidity in the system will come under strain as the private sector also competes for funds.
There have been attempts at bringing about reforms in subsidies, and the assumption that the fuel and fertiliser subsidy will decline this year will test the character of this reform.
Madan Sabnavis Chief Economist, CARE Ratings
