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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_BudgetPreview_2012-13.pdf
Revving up growth via discipline…
Moderating GDP growth, slowdown in capex, high interest rates and
burgeoning subsidies (oil and food) highlight the need for a disciplined
Budget 2012-13. The key message of the ensuing Budget should be to
realign variables to strike a fine balance in bringing back growth and laying
down a credible plan to control fiscal deficit. We believe Budget 2012-13 will
be the last chance where the government can get bold and get its act right
for revving up growth and bringing back the economy on the right track.
Therefore, we expect GFCF formation to take centre stage even though the
focus on consumption growth would not be compromised upon.
Key points to watch out for:
• On the revenue receipts front, hiking indirect taxes (mainly excise duty
and broadening the net of services under tax) seems inevitable as at
least in H1FY13, direct tax components may be unable to contribute in
a significant manner. We expect excise duty and service tax collections
to rise by 18% YoY in FY13E
• Direct tax revenue collections are expected to fall short of budgeted
estimates for FY12E mainly on account of underachievement in
corporation tax revenues. We expect the same to grow ~9% in FY12
vis-à-vis the budgeted growth rate of 20%. For FY13E, we have built in
the growth rate for corporation tax at 14%, which is in line with our EPS
estimates of BSE Sensex companies for FY13E
• One of the major disappointments for Budget 2011-12 would be the
shortfall of disinvestment proceeds, which was pegged at | 40000
crore. We estimate the same to be at ~| 14000 crore, thereby adding
0.3% to the projected deficit for FY12E. In FY13E, in our base case, we
have built in estimates of | 30000 crore. However, the same is highly
sensitive to capital market conditions going into FY13E
• On the spending side, we expect plan expenditure growth to be less
than what was budgeted. Plan expenditure for 10MFY12 has been 67%
of the target. Overall for FY12E, we estimate the same to rise by 10%
vis-à-vis a target growth of 17%. In FY13E, we believe the government
does not have enough room to hike allocation to the various social
welfare schemes. Hence, we expect plan expenditure to rise 11% YoY
• Another significant pain area for the deficit would be the higher than
estimates petroleum, food and fertiliser subsidy. The above subsidies
taken together were budgeted at | 134211 crore. We expect the same
to reach | 228211 crore, implying a rise of 70%. This will add another
0.9% to our fiscal deficit target of 5.8% for FY12. Going into FY13E,
with an expanded GDP base (14% nominal growth) and same subsidy
assumptions, we forecast a fiscal deficit number of 5.3% for FY13. Key
risks would include oil prices, interest rates and disinvestment
proceeds
• On the borrowing front, we expect the government to budget in a gross
market borrowing of | 5.2 trillion and | 5.3 trillion for FY12E and FY13,
respectively
• We expect the government to budget a gross fiscal deficit of 5.8% for
FY12 (2011-12RE) and set a target of 5.3% deficit for FY13E (2012-13
BE)
What is highly crucial for Budget 2012-13 to lay a credible and realistic plan
to bring down fiscal deficit and rev up growth for the economy
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_BudgetPreview_2012-13.pdf
Revving up growth via discipline…
Moderating GDP growth, slowdown in capex, high interest rates and
burgeoning subsidies (oil and food) highlight the need for a disciplined
Budget 2012-13. The key message of the ensuing Budget should be to
realign variables to strike a fine balance in bringing back growth and laying
down a credible plan to control fiscal deficit. We believe Budget 2012-13 will
be the last chance where the government can get bold and get its act right
for revving up growth and bringing back the economy on the right track.
Therefore, we expect GFCF formation to take centre stage even though the
focus on consumption growth would not be compromised upon.
Key points to watch out for:
• On the revenue receipts front, hiking indirect taxes (mainly excise duty
and broadening the net of services under tax) seems inevitable as at
least in H1FY13, direct tax components may be unable to contribute in
a significant manner. We expect excise duty and service tax collections
to rise by 18% YoY in FY13E
• Direct tax revenue collections are expected to fall short of budgeted
estimates for FY12E mainly on account of underachievement in
corporation tax revenues. We expect the same to grow ~9% in FY12
vis-à-vis the budgeted growth rate of 20%. For FY13E, we have built in
the growth rate for corporation tax at 14%, which is in line with our EPS
estimates of BSE Sensex companies for FY13E
• One of the major disappointments for Budget 2011-12 would be the
shortfall of disinvestment proceeds, which was pegged at | 40000
crore. We estimate the same to be at ~| 14000 crore, thereby adding
0.3% to the projected deficit for FY12E. In FY13E, in our base case, we
have built in estimates of | 30000 crore. However, the same is highly
sensitive to capital market conditions going into FY13E
• On the spending side, we expect plan expenditure growth to be less
than what was budgeted. Plan expenditure for 10MFY12 has been 67%
of the target. Overall for FY12E, we estimate the same to rise by 10%
vis-à-vis a target growth of 17%. In FY13E, we believe the government
does not have enough room to hike allocation to the various social
welfare schemes. Hence, we expect plan expenditure to rise 11% YoY
• Another significant pain area for the deficit would be the higher than
estimates petroleum, food and fertiliser subsidy. The above subsidies
taken together were budgeted at | 134211 crore. We expect the same
to reach | 228211 crore, implying a rise of 70%. This will add another
0.9% to our fiscal deficit target of 5.8% for FY12. Going into FY13E,
with an expanded GDP base (14% nominal growth) and same subsidy
assumptions, we forecast a fiscal deficit number of 5.3% for FY13. Key
risks would include oil prices, interest rates and disinvestment
proceeds
• On the borrowing front, we expect the government to budget in a gross
market borrowing of | 5.2 trillion and | 5.3 trillion for FY12E and FY13,
respectively
• We expect the government to budget a gross fiscal deficit of 5.8% for
FY12 (2011-12RE) and set a target of 5.3% deficit for FY13E (2012-13
BE)
What is highly crucial for Budget 2012-13 to lay a credible and realistic plan
to bring down fiscal deficit and rev up growth for the economy
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