Fiscal deficit to be around 5% this year: JP Morgan

Sajjid Chinoy of JP Morgan on his points of judgement for Union Budget 2011.

Give us three bullet points on the basis of which you are going to judge the budget as a make or break event?

Sajjid Chinoy: I think the large numbers on the budget are well known. This year’s fiscal deficit will post around 5%. Next year the government will target about 4.8%. The keys are the assumptions that lead to that fiscal consolidation realistic and credible. It must be understood that loose fiscal policy and lose monetary policy have been largely responsible for high inflation levels and the most important thing the finance minister can do today is to undertake credible fiscal consolidation to reduce aggregate demand and bring inflationary pressures down. I will look for not too optimistic assumptions on revenue buoyancy. I would look for more realistic assessments of what the subsidy will be especially the oil subsidy and those assumptions being credible will give me lot of comfort in terms of the fiscal consolidation actually being achieved.