- Finance Minister has presented budget for FY18-19, which is more of inflationary in nature.
- Fiscal deficit is likely to increase to 3.5% in FY18E vs. the government's initial target of 3.2 %of GDP. Even for FY18 19 fiscal deficit target has been revised to 3.3% vs earlier target of 3%. Higher Fiscal deficit will lead to higher borrowings by the government. FM has raised Custom duty on input related to Consumer goods. Government has also decided to keep MSP for the all unannounced crops of kharif at least at 1.5x of their production cost. This all are indicators of increasing inflation going ahead.
- Government in this budget has focused more on rural economy and announces various measures to improve growth over there
- Well talked long term capital gain tax has been re-introduced in the budget on both domestic (including mutual funds) and foreign institutional investors @10% with immediate effect. Another source of fund which the government has targeted this time is the increase in custom duty where in duty are increased substantially to encourage local production. Governemnt has prepared the market well in advance for this populist budget and market had already prempted the nature of the budget.
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- Budget is becoming more of a statement of account and policy statement and major changes (including GST rates) are happening out of the budget. We feel post this event market will again start focusing on earnings and global markets.
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