By: Equity Investment Team
While the budget is an annual exercise of the government’s finances, a holistic way to analyse the budget is to look at the path chosen by the government over its entire term – if it has been consistent with its promises.
In this context, NDA’s governments 5th budget, despite the pressure of impending general elections has stayed largely true to the course of the previous 4 years.
The introduction of new subsidies, income support for farmers and increased food subsidy, will dent the spending on capital expenditure for FY20; capital expenditure has been the highlight of this government in all previous budgets.
Our Key takeaways from the Interim Budget:
• Boost to rural and urban middle income households
• Fiscal prudence largely maintained despite election pressures
• Commitment to adhere to the fiscal deficit glide path and attain 3% by 2021
Not So Good:
• Fiscal Deficit for FY20 expected to be 3.4% with no improvement over FY19.
• Increase in subsidies overshadows growth in Capital expenditure
• Fiscal math aided by high Goods and Services Tax (GST) growth assumptions and high divestment/ dividend targets
• Revival of Real Estate sector by giving much needed sops
• Expansion of tax exemption to Rs 5 lakh provides much needed succour to the urban middle class
Please find the detailed presentation on Budget 2019 here.