Budget is only ‘mildly growth supportive’: Crisil

The Dollar Business Bureau 

The Union Budget focuses more on the hinterland and is just mildly supportive of growth which may reach 7.4% in FY 2017-18, as per an analysis by Crisil. 

“We are expecting a gradual rise in the GDP (gross domestic product) growth to 7.4% from 7% in 2017-18 as investment cycle is likely to remain sluggish and consumption demand will be expected to pick up just moderately in spite of cut in tax rates and softer rates of interest,” Crisil said in a post-Budget statement on Thursday. 

Observing that the Budget is just ‘mildly growth supportive’, the agency said the main focus is on the revival of the rural sector by boosting agriculture and infrastructure. 

While applauding the ‘prudence over populism’ move of the Finance Minister Arun Jaitley in limiting the fiscal gap to 3.2%, it said that he has done a balancing act by abstaining from widening the fiscal coffers to provide the economy with a steroidal push. 

Commenting on the shortcomings, the rating and research agency said the one major thing that is missing in the Budget is the lack of a strategy to resolve banking industry assets quality and recapitalisation worries. 

The target to cut borrowings to Rs.3.48 trillion is a positive sign for bond markets. Concessional rates of tax for external commercial borrowings (ECB) and capital gains benefit for Indian-rupees denominated masala bonds will encourage overseas fundraising. 

On the front of rural economy, it said that reviving the fortunes in hinterlands by boosting the rural infrastructure and agricultural economy seems to be the key motivation of the Union Budget announcements while adding that it is essential given the fact that impact of the note-ban on these pockets was the most. 

The focus on the rural economy is visible with proposals such as more allocations for rural jobs scheme, spending on Pradhan Mantri Awas Yojana (PMAY), dairy and micro-irrigation.