SME Times News Bureau | 23 Jan, 2020
The Union Budget 2020 could focus on spending toward
railways, defence and toward reviving sentiment in the real estate sector but
the exercise would be to keep the outlays lean so that fiscal deficit does not
slip beyond 3.5 per cent of GDP, a report by broking house Emkay Financials
It said the preceding few months have seen many announcements by the government
with an intention to kickstart growth. Thus, it is understandable that
expectations run high on the upcoming Budget.
"However, given the tight fiscal space, we doubt many big bang
announcements could be made," it said.
The steep fiscal slippage of 48 bps in FY20 is largely due to growth slowdown
and the lack of addressing sector-specific issues. The FY21 budget will
probably look relatively slimmer with a deficit of 3.5 per cent of GDP.
Concentration of spending would again steer toward railways, defence and toward
reviving sentiment in the real estate sector, it noted.
"The shortfall in disinvestments is also likely to be Rs 46,900 crore and
the target is likely to be rolled forward to FY21. Our base case does not
include receipts from the telecom sector on AGR dues," Emkay said.
"Expenditure to be squeezed based on the steep shortfall in revenue
receipts, we believe that the government is likely to curtail expenditure by Rs
1.8 lakh crore. Major savings are likely to emanate from food subsidy
(transferred off balance sheet), lower interest payment outgo and savings
generated from the PM-Kisan scheme. FY21 expenditure concentration to remain
similar to that of FY20, where the budget allocation would continue to remain
tilted toward railways, defence and urban infrastructure," said the
Gross borrowing figure is likely to be budgeted at Rs 7.5 lakh crore, i.e.,
growth of 5.7 per cent year-on-year. This is likely to keep the yields elevated
near 6.8-7.0 per cent said the report. No big announcements but allocation
could be tilted toward infra/power/real estate, than consumption boosters.
"We see a low likelihood of a personal tax rate cut, given the consumption
boost would be small and transient. On the other hand, we expect announcements
around power sector (Discom reforms), where implementation details on how the
incentives will be structured for state discoms will be critical,
infrastructure (NIP) where part of the funding could come from outside the
budget and some stimulus for the real estate sector in the form of additional
tax breaks for home buyers."
"In the run-up to the Budget, we could expect some excitement in stocks
like L&T, NTPC and HFCs like HDFC/LICHF (however, this last set could be
impacted by high govt borrowings on funding costs).