Facing the ire of rating agencies and investors alike, the finance minister delivered his promise of fiscal consolidation, projecting a fiscal deficit at 4.8% of GDP for FY14 (year ending March 2014), in line with consensus expectations.
The Biggest question is whether the numbers of Budget 2013-14 are achievable. In our view, the growing size of the government is worrying. Higher taxes are intended to redistribute income from the rich to the poor through the government‟s social sector schemes, likely with an eye on elections. Fiscal consolidation ought to be attained through a combination of higher taxes and lower spending, but the budget uses only the higher revenue route.
The slippage in the budgeted fiscal deficit of 4.8% of GDP may be unavoidable. The size of the government remains large and the quality of fiscal consolidation is disappointing. Hence, we ultimately see this budget as a missed opportunity.
