Savvy Budget, but how will govt deal with inflation?

COMMENT/ Siddharth Roy, Chief Economist, Tata Group

Capital markets feel more comfortable with a savvy budget having its usual twists and turns than a so-called path breaking one. Viewed from that perspective, the current budget is reassuring in its content. First, throughout the budget, there is a strong underlying focus on generating future demand, both in the areas of consumption and investment, the assumption being buoyancy in the economy will be leveraged for meeting tax targets.

This budget also has an element of fiscal prudence inbuilt into it. Targets for bringing down fiscal deficit to GDP ratio over a period of three years, target dates for the implementation of GST and direct tax code and capping of government borrowings at the Rs 3,45,000-crore level are some of the examples.

However, there is one riddle. It is not clear as to how the government is going to deal with inflation.