fiscal deficit, tax relief, rural spending in focus

Experts warned that will if growth were to disappoint again inside brand new financial year, that will could create brand new political along with also economic pressure on Prime Minister Narendra Modi’s government ahead of 2019’s elections. Therefore, the government can be expected spend enough to get the economy growing past 7 percent.

So, market watchers will be paying close attention to Jaitley’s comments on India’s fiscal deficit targets for the next financial year.

Per the country’s fiscal consolidation road map, the recommended target for a budget deficit can be at 3 percent of GDP. Many expect the 2018-2019 target to be slightly higher, anywhere between 3.2 to 3.5 percent.

“Higher commodity prices along with also the need to support to the nascent recovery — especially ahead of general elections in 2019 — are likely to keep the fiscal consolidation process gradual,” economists at Standard Chartered bank said in a note. They predicted the government would certainly set a fiscal deficit target at 3.3 percent of GDP inside brand new financial year.

The economists explained that will they expect to see double-digit growth in indirect tax revenue along with also strong divestment proceeds for the government in fiscal 2019. nevertheless that will could be offset by potential individual income tax relief measures, excise duty cuts on retail fuel products, along with also an increase in rural along with also infrastructure spending. “This particular should keep the pace of fiscal consolidation slow,” the economists wrote.

that will said, a temporary pause inside path to fiscal consolidation will not “necessarily translate into the emergence of macro stability risks,” economists at Morgan Stanley said in a note.

Radhika Rao, an economist at Singapore’s DBS Bank, told CNBC that will as long as the current year’s deficit does not exceed 3.5 percent — the same as that will was in 2016-2017 — India’s commitment to fiscal consolidation would certainly remain intact. The consensus among experts can be that will the current year fiscal deficit has likely exceeded the government’s target of 3.2 percent.

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