Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Dear Visitor: Equitymaster will be under maintenance from 10:00AM to 11.30AM on Sunday, 25 March 2018. During this period, our websites will be accessible though there is a possibility of some intermittent accessibility issues. Please bear with us. We are taking yet another step to make browsing Equitymaster a much faster experience! Thank you.

India may miss Budget targets
Mon, 29 Aug Pre-Open

Uncertainties in the global economy are posing serious problems to India's macro-economic indicators. The global economy is witnessing severe debt crisis especially in the United States and some of the European regions. Now the fear of a double dip recession is looming large around the world. The Economic Advisory Council to the Prime Minister of India (PMEAC) has already started forecasting that the government is going to miss the fiscal deficit target of 4.6% of Gross Domestic Products (GDP) for the financial year 2011-12. Recently, Standard Chartered Bank has revised its fiscal deficit forecast for 2011-12 to 5.4% of GDP from 5.1%.

There are many factors behind all these negative forecasts. Due to slowing GDP growth, revenue collections would be affected. There is also a chance that the government may miss its targeted proceeds from disinvestments due to the prevailing weak market sentiments. Subsidies on petroleum products and fertilisers are surging. The recent hikes in petroleum products are also not helping much due to several cuts in excise and custom duties for different petroleum products. There still exists a big misalignment between local fuel prices and global crude oil prices. Welfare spending on employment programmes such as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme is expected to keep the government's expenditure high. All this may result into a higher fiscal deficit.

Apart from fiscal deficit, Indian economy may also face current account deficit. The weakening global economic conditions may adversely affect the exports of goods and services. This would lead to a higher-than-expected trade deficit.

The problem is, in the face of any slowdown, unlike 2008, this time the government is not left with too many options to take stimulus measures. Inflation is already very high and there is no sign of its softening in the near future. It is expected to moderate only towards the end of the current fiscal year. The only respite for the inflation would be declining commodities prices in the wake of weakening global economy.

There are chances that the capital inflows would also get affected. The foreign investors would leave emerging markets to cover their losses elsewhere. It would become difficult to raise money through domestic bonds due to bleak economic conditions and adverse fiscal positions which would make the bonds less attractive. All this will propel the cost of borrowings for the Indian companies. This in turn would affect growth and profitability.

It is high time for the Government of India and Reserve Bank of India (RBI) to ponder upon on its policies in the wake of rising uncertainties in the global economy. Reserve Bank of India (RBI) has already raised key lending rates 11 times since March 2010 to tame the inflation. Now, the time has come that it should consider a pause. Otherwise this rate increase policy would adversely impact the growth of the Indian economy. At the same time, the government should take the right steps to curb the supply side constraints to ease out inflation.

Definitely, the Government of India and its independent agencies such as RBI do not have any control over the worsening scenario in the global economy. But right measures taken at the right time may lessen the adverse effects of the same.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "India may miss Budget targets". Click here!


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Mar 23, 2018 (Close)