INSUBCONTINENT EXCLUSIVE:
economists and overseas rating agencies, but analysts find her Budget math very chancy, with a real risk that the government would fail to
meet many of its ambitious revenue goals.
A deeper look at the Budget arithmetic suggests the FM is going to have many sleepless nights,
doing the firefighting to manage the revenue math in an environment of fragile growth and edgy markets.
Most foreign brokerages said India
took a calculated risk in Budget 2020 to keep itself on the path of fiscal consolidation, but there is now more than one downside risk to
the underlying assumptions.
For one, they feel meeting the aggressive divestment target of Rs 2.1 lakh crore for FY21 will hold the key
Finance Minister Nirmala Sitharaman on Saturday revised fiscal deficit target for FY20 to 3.8 per cent of GDP against the Budget estimate
of 3.3 per cent and set a target of 3.5 per cent for FY21.
The FY21 divestment target, if met, will be a record
The government also aims to more-than-double its revenues from the telecom industry to Rs 1,33,000 crore, which brokerages find quite
Credit Suisse said even the Rs 65,000 crore divestment target for FY20 looks high, as only Rs 28,000 crore has been raised so far.
On the
target to double telecom revenues, BofA Securities said it is unclear whether the government is budgeting any receipt of the historical AGR
(adjusted gross revenue)-linked demands on the incumbent telecom companies or is simply relying on higher revenues as companies raise
at Rs 2.4 lakh crore each for FY21 and FY20 (revised) against Rs 1.3 lakh crore initial estimate for FY20, also surprised analysts, as this
is supposed to fund 30 per cent of the fiscal deficit
Analysts said given the higher funding targets from small savings, small savings interest rates are unlikely to see any meaningful
gross tax revenue growth target for FY21 was pegged at an ambitious 12 per cent, while the Budget aims for a nominal GDP growth of 10 per
a revised FY20 target of Rs 6,12,327 crore
Goldman Sachs said this would require a 15 per cent increase in average run rate per month (from Rs 50,000 crore per month in FY20 YTD to Rs
57,500 crore).
Income-tax collection is also expected to increase to 2.8 per cent of GDP from 2.7 per cent
This, despite the lowering of income-tax rates, and perhaps reflects assumptions of increased compliance despite a loss in revenues, Goldman
buoyancy of 1.2 continue to appear ambitious versus the 0.5 tax buoyancy achieved in FY20
Unless there is a sharp increase in tax compliance, it is quite likely that the government will have to cut current spending, as was the
We see a potential revenue disappointment of 0.5 per cent of GDP, which will likely result in lower spending and a partial 20 basis points
calculated risk by maintaining on the path of fiscal consolidation, while at the same time setting ambitious expenditure programmes
growth may remain subdued for longer than market expectations now, and lower interest rates remain a necessary condition for growth revival