There was a big 'wow' factor in this Union Budget that nobody noticed: Ridham Desai

NEW DELHI: There was a lot of noise around the Union Budget 2017, but there was one big factor which seems to have gone unnoticed, which is the lowering of the debt-to-GDP ratio.

“The government’s commitment to reduce the debt-to-equity ratio was one 'wow' factor,” Ridham Desai, MD, Morgan Stanley said in an interview with ET Now.

The FRBM committee has done an elaborate exercise and recommended that a sustainable debt path must be the principal macro-economic anchor of our fiscal policy, Desai said.

The committee has favoured a debt-to-GDP ratio of 60 per cent for the general government by 2023, consisting of 40 per cent for central government and 20 per cent for state governments.

Within this framework, the committee has derived and recommended 3 per cent fiscal deficit for the next three years. The committee has also provided for an 'Escape Clause' for deviations up to 0.5 per cent of GDP from the stipulated fiscal deficit target.

To boost foreign investor confidence, the Finance Minister announced the scrapping of the Foreign Investment Promotion Board (FIPB), which is a refreshing change, Desai said. The move will help further liberalise foreign inflows into India.

Commenting on the monetary policy, Desai said it looks like RBI is coming to an end of rate cut cycle. “We could see a maximum of one more rate cut,” he said.