Pragmatic but timid

Most brokerage houses believe the fiscal deficit target of 5.1 per cent for 2012-13 is too optimistic. For some, it's a ‘pragmatic’ Budget, given the Congress-led ruling alliance's political compulsions, while others believe it's a missed opportunity. A brief summary of brokerages’ views on the 2012-13 Union Budget:

ANAND RATHI FINANCIAL SERVICES
Neither here nor there

• The Budget is devoid of any meaningful reform that could have addressed fiscal, inflation or growth problems. The targets seem, too, optimistic. 
   
• We expect subsidy payment, fiscal deficit and market borrowing to be higher and corporate tax lower than budgeted. 
   
• The fiscal deficit target of 5.1 per cent of gross domestic product in 2012-13 is unattainable due to overestimated revenue and underestimated spending. 
   
• The rise in general excise duty will weigh negative on the auto and consumer sectors.

PINC RESEARCH
Politically correct

• Contrary to expectations, the Budget was less severe on the industry, despite its focus on revenue mobilisation. 
   
• The across-the-board increase in service tax and excise duty rates is inflationary and is likely to delay interest rate cut. 
   
• Amendment to the Income Tax Act, 1961, to widen the definition of income deemed to accrue from India with retrospective effect is a big setback for foreign investments 
   
• The increase in customs duty on gold is a right step towards channelising domestic savings in productive assets.

EMKAY GLOBAL
Promises > expectations; conviction < realism

• Higher-than-expected expenditure Budget and intent for fiscal consolidation should have reflected in meaningful cuts in non-plan expenditure. 
   
• An understatement of fuel subsidy. In Rs 43,600 crore provided as petroleum subsidy for 2012-13 Budget Estimates, we believe Rs 40,000 crore is the spill over of 2011-12. The Budget is also silent on fuel price hikes. 
   
• Optimistic assumption for gross tax collections, non-tax revenue and disinvestment targets. 
   
• The divestment target of Rs 30,000 crore could be at risk, given that the mobilisation in the 2011-12 Revised Estimates was far less than the initial Rs 40,000-crore target.

ANGEL BROKING
A pragmatic Budget

• The increase in excise and service tax rates and the widening of the service tax ambit are on expected lines and make the Budget's revenue estimates more believable. 
   
• Even if the government delivers on its intent to increase retail oil prices, the fiscal deficit would be 40-50 basis points lower than that in 2011-12. 
   
• The Rs 40,000 crore from telecom spectrum auction and the Rs 30,000 crore from divestment are not over-ambitious targets. 
   
• Oil and gas are among the key sectors that are negatively impacted. The increase in the cess on crude oil is negative for Cairn and ONGC.

KOTAK INSTITUTIONAL EQUITIES
Balancing act

• The government's 2012-13E gross fiscal deficit/gross domestic product target of 5.1 per cent is a tad optimistic, against our more realistic assessment of 5.4 per cent. 
   
• The Budget and likely fuel price increases will be negative for consumption demand. The investment cycle will take time to pick up. 
   
• The increase in tax rates on goods and services is likely to impact consumption demand moderately and profitability selectively. 
   
• We do not see a modest improvement in the fiscal position and a moderate decline in interest rates as being enough to drive the investment cycle.