While welcoming the broad thrust of the Union Budget towards fiscal consolidation and measures to boost savings, economists expressed reservations on the lack of clarity on the issue of subsidies.
Sonal Verma, Economist, Nomura Securities, said in a report the Budget was a mixed bag. While the Government has committed to medium-term consolidation and has announced measures to attract capital inflows and boost investments, it had left the issue on unpaid subsidy bills unresolved, she said.
The fiscal deficit for FY15 (year-ending March 2015) was left at 4.1 per cent of GDP versus 4.5 per cent in FY14. This was a positive surprise, she said, because of market expectations that the deficit target would be revised higher, taking into account unpaid subsidy bills. Dated market borrowings were largely unchanged at Rs 6 lakh crore. Terming the fiscal assumptions as marginally optimistic, Sonal said one of the disappointments in the Budget was that the allocation on subsidies, at 2 per cent of GDP, was largely left unchanged from the interim Budget target (1.9 per cent).
“We had expected the Government to come clean on subsidy bills with a higher number, ensuring more credibility. However, this did not materialise. This suggests either slippage on non-planned expenditure or a continuation of past policies (subsidy rollover) or a cut in planned expenditure to meet the fiscal deficit targets,” she said.
Devendra Kumar Pant, Chief Economist, India Ratings & Research, said the Government has given a fillip to household savings by raising the tax exemption limits and announcing a slew of measures to push investments. He said these efforts should address supply-side constraints, which have adversely impacted the economy and kept the inflation rate high, particularly of food products. He felt the continuation of excise exemption in certain sectors till end-December 2014 and investment allowance to MSMEs up to FY17 will also support growth.