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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Stated fiscal consolidation will be hard to achieve
? Govt announces gross fiscal deficit for FY13 at 5.1% of GDP (against 5.9% of GDP in FY12), which may be difficult to achieve. We see risks of slippages to the tune of 0.4% of GDP, taking the fiscal deficit to as high as ~5.5% of GDP.
? While tax revenues are not unrealistic, fuel subsidy is clearly underprovided and revenues from telecom look optimistic.
? Budgeted net market borrowing of INR 4.8 trn for FY13 also faces upside risk of ~INR400-500bn. Therefore, bond yields will be under pressure.
? Overall, some attempt towards consolidation, but not enough to mark a shift in the overall fiscal stance.
No meaningful attempt to reign in expenditure
? The budgeted plan expenditure growth stands at ~22% YoY, almost double of 11% growth seen in FY12. This suggests that the FM has continued to increase allocation to social sector schemes and has not made a serious attempt to reign in expenditure.
? At the same time, we expect slippages in non-plan expenditure mainly on account of subsidies.
Hikes in indirect taxes largely expected
? Hikes in excise duty (10-12%) and introduction of ‘negative’ list for services was largely expected. This, along with hike in service tax from 10% to 12%, means that tax revenue growth of ~19.5% YoY is achievable.
? However, there is a risk of slippages on the non-tax revenue front, where budgeted telecom revenues of INR580bn look quite optimistic.
? There is no specific time-frame for implementation of GST.
Mildly positive for infra
? Tax free infra bonds to increase from INR300bn to INR600bn.
? ECBs can be raised to finance power projects.
? 5% import duty on thermal coal to be discontinued.
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