WEEKLY
REPORT ON FOREX, BOND, EQUITY, COMMODITY MARKET
Date : 19.03.2012
There was no disappointment (neither pleasant
nor unpleasant) from the Budget FY13 and the FM has done well within the
available means; defensive and firm. FM did not have the bandwidth to go
big-bang on reforms (economic or structural) to ramp up revenues or to cut
subsidies to manage cost efficiency. Our expectation revolved around the main
themes of GDP growth at 7.5%; fiscal deficit at 5%; net market borrowing of
around Rs.4.5 Trillion; higher taxes (and coverage) to bridge fiscal gap and
measures to ensure flow of cost subsidisation to the right target segment. www.goldennifty.com
It was also considered essential to pull
off-shore liquidity to infrastructure and ensure availability of domestic
investments to core sectors. The actual numbers are more or less in line with
expectation with FY13 estimates of 7.6% GDP growth; 5.1% fiscal deficit with
slippage in net market borrowing at Rs.4.8 Trillion and disinvestment target of
Rs.40K Crores. The placement of cap at 2% of GDP for cost subsidisation without
keeping it open-ended is a welcome move. www.goldennifty.com
The plan to make direct cash transfers through
Unique ID system will avoid leakage in subsidy distribution and ensure reach to
right audience. There are measures for infrastructure companies to access
off-shore markets for debt and increase in issuance of tax-free bonds to
domestic investors. It was not a surprise to see increase in taxation (move
close to 2008 levels) and cutting the negative list for service tax for higher
coverage. The FM has also released pressure on Current Account Deficit through
higher taxes on import of Gold and precious metals. All other major aspects
linked to economic or structural reforms are untouched.www.goldennifty.com
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