What Experts Say About Union Budget 2012-13 : Expert Views

Finance Minister, Pranab Mukherjee presented Union Budget in the Lok Sabha on Friday. Lets take a look as to what experts" have to say on the Union Budget:

Sonal Varma, Analyst, Nomura:

Economics triumphed politics in the budget for FY13 (year ending March 2013). Expectations were running low after the dismal performance of the ruling Congress government in recent state elections and the budget was a litmus test on the government"s commitment to judicious economic policies.

In the event, the government has presented what we see as a credible budget: the fiscal deficit is projected at a higher-than-expected 5.1% of GDP in FY13, down from 5.9% in FY12 (budgeted: 4.6%). The government faced the option of projecting a lower but unrealistic deficit number, or a higher, more credible number. Choosing the latter is prudent, in our view, and we do not see much room for slippage. The medium-term fiscal policy statement projects the fiscal deficit to decline further to 4.5% of GDP in FY14 and to 3.9% in FY15. The government plans to finance 93% of the deficit through market borrowings (versus 84% last year), pegging net borrowing at Rs 4.8 trillion, 10% higher than FY12 and gross borrowing at Rs 5.7 trillion, a rise of 12%.

In our view, the government has been realistic in its tax revenue, disinvestment and growth projections. The hike in indirect tax rates is inflationary, but was necessary to raise the tax-to-GDP ratio. Quality of spending has also improved, as capital expenditure is projected to rise faster than revenue expenditure. The government has committed to restrict expenditure on subsidies to under 2% of GDP from 2.4% in FY12, but with no concrete measures yet, we see room for overshoot on the subsidy bill. However, there is enough of a cushion in other spending to be able to absorb this, in our opinion. We also do not see much populist policy in the budget. We believe the continued reliance on asset sales to lower the deficit and the lack of a clear-cut plan on subsidies are the only negatives. The government now needs to walk the walk.

Anup Bagchi, MD & CEO, ICICI Securities:

Budget 2012-13 has been an honest budget implicating ground realities with continued focus on fiscal consolidation. The expected fiscal deficit of 5.1% and full rollback of impetus during global crisis of 2008 by hiking the rate of excise and service tax rate will help in achieving it and appears highly achievable.

The budget though also had a modest increase in the allocation to social welfare schemes and provided relief to individuals hiking tax exemption limit (Income till Rs 200000 exempted from Tax). Also, reduction in customs duty for import of coal, LNG and capital equipments along with hiking allocation to road sector has to a certain extent taken care of some of the concerns faced by infra sector.

Initiatives such as the Rajiv Gandhi equity savings scheme, lower STT on delivery, and higher tax free infra bonds will lead to increased participation from retail investors through these benefits.

Mehta Equities:

On overall basis it was a conservative budget presented with no major negatives hidden in the box. We feel that this budget is aimed at addressing to the problem of inflation and for a stable economy looking at the global economic concerns. A very small raise in the exemption limit by Rs 20,000 disappointed the large section of income tax payers in the country.

The revision in tax slabs will give some direct tax relief to individuals, even as eating out; buying luxury cars, air travel, availing some professional services and investing in gold jewelery will become costlier. While for the corporate sector, the tax rates will remain unchanged which stands out to be little relief in the current market scenario. Promising to curb black money, major push on infrastructure, capital market reforms and huge subsidy cut were among the other proposals which kept markets in green. From a market"s perspective it appears like a big non-event no big announcement in this Budget to lift corporate sentiment dramatically.

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Source : myiris