Limited scope for radical budget this year: DBS

There is limited scope for a radical budget this year, DBS said in a research note today adding that the key thrust areas for the government is likely to be rural development and addressing banking sector's woes.
"There is limited scope for a radical budget this year, but the broad-based and granular approach is set to continue," DBS said in a research note.
The key thrust areas of the budget would include rural development, addressing banking sector's woes and maintaining capex needs, while absorbing the bigger public sector wage/ pension bill, the report added.
According to the global financial services firm, the FY2015/16 deficit target is likely to be met, while commitment to fiscal discipline is likely to be "put to test" in FY2016/17.

"We suspect the odds are stacked against fiscal tightening...," DBS said in a research note adding that a modest miss on the target to 3.7 per cent of GDP is likely on the cards".
The government proposes to bring down fiscal deficit from 3.9 per cent in the current fiscal to 3.5 per cent in 2016-17.

Reflecting improvement in government finances, fiscal deficit - the gap between the government's expenditure and revenue - in the nine months of 2015-16 worked out to 88 per cent of the annual target as against 100.2 per cent in the same period last fiscal, according to official figures.

According to the global brokerage firm, few tax tweaks are on the anvil.
The corporate tax rate is due to be lowered to 29 per cent from the current 30 per cent, while the service tax might also be adjusted higher to 16 per cent from the current 14.5 per cent, the report said.
On the Reserve Bank's monetary policy stance, the report said that the contents of the budget would be "key to keep the door open for further easing".
The bank also plans to add asset-side products to the
offering, gradually and build a book of Rs 10,000 crore in the next five years, Gupta added.

Terming India as far superior in digital infrastructure than other Asian countries it operates in, Gupta said the bank chose to launch Digibank here first because of the Aadhar-based eKYC (know your customer) offering.
It plans to take the same product to Indonesia and China after this, where the regulators have now floated discussion papers on how to utilise the digital infrastructure, Gupta said.
The launch of the product will also help improve cost to income ratio, Shome said, adding it plans to take it down to 45 per cent from the present 55 per cent.
When asked if the Digibank scheme will impact branch rollout plans, Gupta said DBS continues to target to take the total branches to up to 70 in the next four-five years from the 12 and explained that its focus on small businesses will require it to increase its footprint.

The expansion plans depend a lot on the progress on its move to operate as a wholly-owned subsidiary here, Gupta said, adding even after nearly a year, the bank is yet to receive the go-ahead from Reserve Bank.
He, however, said this is as per the guidance given by the RBI at the time of application for the WOS model.