Budget 2015: Economists say fiscal roadmap & target of 3.9% of GDP for next fiscal are credible

NEW DELHI: The budget got thumbs up from analysts, with most lauding Finance Minister Arun Jaitley for finely balancing the twin objectives of fiscal consolidation and growth. The fiscal roadmap and the target of 3.9% of the GDP for the next fiscal are also credible with spending and collection numbers adding up, economists say.

"Set against a backdrop of sky-high expectations, FM Jaitley's budget ticks many boxes," said Citi economist Rohini Malkani in her note. "The numbers appear largely credible, given assumptions of nominal GDP growth at 11.5%, revenue growth of 4.6%, and expenditure up 5.7%," she said, adding that the budget is a fine balancing act between fiscal consolidation and creating enabling conditions for growth and job creation.

FM Jaitley extended the deadline for controlling fiscal deficit to 3% of GDP by a year on grounds that the pre-set timeline could affect India's growth prospects. The government is targeting to narrow the fiscal deficit to 3.9% of GDP next fiscal and reduce it gradually to 3% by 2017-18. The GDP growth is estimated between 8 and 8.5% in 2015-16. "We see no risk to the fiscal deficit target of 3.9% of GDP," said Shubhada Rao, chief economist, YES Bank.

Economists praised the budget for its comprehensive nature, right from laying out a transformative tax regime, higher public investments to kick-start growth, direct benefit transfers/Jan Dhan to plugging leakages in subsidy delivery. Ratings agency Crisil said that the fiscal federalism was an enabler.

"Greater power to states is essential for local capacity building and efficient use of resources. The government has taken steps in the right direction in this regard in the current budget. Total transfers as a percentage of GDP from the Centre to the states have increased from 4.5% in 2013-14, 5.5% in 2014-15, to 6.0% in 2015-16," said Crisil. On the contrary, the government has substantially increased transfers under the centrally-sponsored schemes to Rs 23,900 crore from Rs 4,600 crore in 2014-15.

Soumya Kanti Ghosh, chief economic adviser, State Bank of India, said that the decision to incentivize credit card transactions coupled with a new law on black money will reduce the social cost for unaccounted money. "The proposed introduction of a gold deposit scheme is a big positive and conservative estimates show that the monetary value of gold deposits mobilized may be at least Rs 1 lakh crore,” he added. The emphasis on the Make in India campaign through infrastructure and duty correction is also seen as a growth enabler.