The government is expected to continue its fiscal consolidation at a slower pace in the ensuing budget with a fiscal deficit target of 3.2 per cent of GDP for 2018-19, says a report by Nomura. According to the Japanese financial services major, it is expected to be a “good” budget one that attests to the rural distress and “common man” issues without jeopardising fiscal consolidation. “Macro prudence should triumph over myopic populism,” it noted. The Union Budget for 2018-19 is scheduled to be presented on February 1.
It is a significant event because it is the last full budget ahead of the 2019 general election. In light of the election and amid ongoing farm distress, there are concerns of an overly populist budget. “In our view, the government will present a “good” budget one that attests to the rural distress and “common man” issues without jeopardising fiscal consolidation,” it said. According to Nomura, the government will miss its 2017-18 budgeted fiscal deficit target of 3.2 per cent of GDP and to revise it to 3.5 per cent of GDP. ”
Despite the spate of elections lined up, we expect the process of fiscal consolidation to continue with the government targeting a lower fiscal deficit in 2018-19 at 3.2 per cent of GDP a slight deviation from the originally intended 3.0 per cent,” it said. According to Nomura, rural development and agriculture are likely to be key areas of policy focus in terms of budget allocation and implementation. Infrastructure development is also is likely to see a continued push this year as well, it said.