w Budget is “people-friendly” as expected.
w Emphasis on inflation and inclusive growth.
w Focus on agriculture, education, healthcare, employment creation, and greater social equity.
w Unexpected large debt waiver for small farmers – financing pattern for banks still unclear. Detrimental for long-term goals of better discipline for institutions and system.
w Focus on boosting consumption - cutting tax burden will help boost demand in near term.
w Reduced excise duties will have positive impact for inflation as well.
w Meeting FRBM target for GFD “on paper”. Target 2.5% of GDP in FY09. Real picture may worsen significantly if Pay Commission recommendations, debt waiver funding and off-balance sheet bonds to be considered.
w Missing FRBM target of zero revenue deficit for FY09 – new target 1% of GDP. May be under further stress in case of a relatively slow growth and reduced tax buoyancy in FY09.
w Limited focus on investments barring increased outlay for highway development and power sector.
w Capital markets outlook positive over longer horizon. However, not much in the budget to reduce near-term pain.
w In sum, budget attempts to address the immediate concerns of the economy of boosting demand and taming inflation. But subdued sentiment of the corporates and capital markets is less favourable for boosting investment-led growth.
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