CRISIL deplores Govt's revenue slipshod; gives guarded welcome to Budget
NEW DELHI, MAR 03, 2013: STANDARD and Poor's Indian subsidiary CRISIL has dubbed the slippages in India's tax and non-tax revenue targets over the years as "poor revenue marksmanship".
In its analysis of the Union Budget for financial year 2013-14 unveiled on 28 th February, CRISIL asks:
How credible is the fiscal arithmetic and medium-term consolidation programme?
It answers: "We expect fiscal deficit to settle at 5.0 per cent of GDP against the budget target of 4.8 per cent. We believe the government is likely to miss the revenue growth target of 23.4 per cent in 2013-14 as disinvestment and spectrum sale targets are too ambitious."
It points out that in the recent past, while both expenditure overshooting and revenue underperformance have been responsible for higher-than-budgeted fiscal deficits, the latter has contributed more to the fiscal slippage.
It contends that this year too, the budget is likely to miss the revenue growth target due to a possible slippage on the disinvestment and spectrum auction targets.
Shocks from unanticipated changes in growth can throw the budgeted revenue estimates out of gear.
CRISIL observes: "In the past few years, irrespective of whether growth was higher or lower than expected, the government has consistently missed the tax revenue targets. This shows poor revenue marksmanship. Some overshooting on the expenditure front too is likely, particularly on food subsidies if the Food Security Bill is implemented during 2013-14."
Noting that the Budget has taken a step towards fiscal discipline as well as announced steps to promote corporate investment and infrastructure, lasting fiscal discipline will depend on the Government's ability to raise the projected revenue and to stick to the budgeted expenditure. This appears to be an arduous task when growth is weak and elections to India's Lower House named Lok Sabha are near.
Given India's high current account deficit, the outlook for the rupee will depend on robust capital inflows in 2013-14. Clarity over implementation of GAAR provisions, government's commitment to maintain fiscal discipline and improved policy communication should boost investor confidence and attract foreign investments, CRISIL says.
It believes that allowing FIIs to use their investments in corporate and government bonds as collateral to meet their margin requirements will help in bringing foreign inflows into the economy.
With the capital inflows providing sufficient cover to the current account deficit (estimated at 3.5 per cent of GDP in 2013-14), CRISIL expects the rupee to settle around Rs. 51-52 to a US dollar by March-end 2014.
NEW DELHI, MAR 03, 2013: STANDARD and Poor's Indian subsidiary CRISIL has dubbed the slippages in India's tax and non-tax revenue targets over the years as "poor revenue marksmanship".
In its analysis of the Union Budget for financial year 2013-14 unveiled on 28 th February, CRISIL asks:
How credible is the fiscal arithmetic and medium-term consolidation programme?
It answers: "We expect fiscal deficit to settle at 5.0 per cent of GDP against the budget target of 4.8 per cent. We believe the government is likely to miss the revenue growth target of 23.4 per cent in 2013-14 as disinvestment and spectrum sale targets are too ambitious."
It points out that in the recent past, while both expenditure overshooting and revenue underperformance have been responsible for higher-than-budgeted fiscal deficits, the latter has contributed more to the fiscal slippage.
It contends that this year too, the budget is likely to miss the revenue growth target due to a possible slippage on the disinvestment and spectrum auction targets.
Shocks from unanticipated changes in growth can throw the budgeted revenue estimates out of gear.
CRISIL observes: "In the past few years, irrespective of whether growth was higher or lower than expected, the government has consistently missed the tax revenue targets. This shows poor revenue marksmanship. Some overshooting on the expenditure front too is likely, particularly on food subsidies if the Food Security Bill is implemented during 2013-14."
Noting that the Budget has taken a step towards fiscal discipline as well as announced steps to promote corporate investment and infrastructure, lasting fiscal discipline will depend on the Government's ability to raise the projected revenue and to stick to the budgeted expenditure. This appears to be an arduous task when growth is weak and elections to India's Lower House named Lok Sabha are near.
Given India's high current account deficit, the outlook for the rupee will depend on robust capital inflows in 2013-14. Clarity over implementation of GAAR provisions, government's commitment to maintain fiscal discipline and improved policy communication should boost investor confidence and attract foreign investments, CRISIL says.
It believes that allowing FIIs to use their investments in corporate and government bonds as collateral to meet their margin requirements will help in bringing foreign inflows into the economy.
With the capital inflows providing sufficient cover to the current account deficit (estimated at 3.5 per cent of GDP in 2013-14), CRISIL expects the rupee to settle around Rs. 51-52 to a US dollar by March-end 2014.
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