According to Radhika Rao of DBS Bank, India’s finance minister unveiled a pragmatic and balanced budget on February 28, but attempting to meet the proposed targets will prove tough and much will depend largely on an economic recovery, favourable external environment and the government’s political will to push ahead with its plans. Rao examines the government’s spending plans and the various proposals to generate tax revenues. Even though the budget failed to win over investors given concerns about an increase in spending, higher taxes and higher bond issuance, the author believes the budget should help to reduce the risk of a credit ratings downgrade in the near-term. However, the government’s deficit targets risk being overshot given the budget’s bullish growth assumptions.
This article was featured in a recent issue of Current Economics. You can download a sample at www.consensuseconomics.com.