Comfort for RBI, rating agencies: Kaku Nakhate

The finance minister has been able to contain the fiscal deficit to 4.8 per cent which will give comfort to both the Reserve Bank and the rating agencies, and should encourage the central bank to lower interest rates in the near future. The increased planned expenditure over this year's contained expenditure, coupled with measures like investment allowance, higher allocation to infrastructure, is a positive to bring the investment cycle back on track. In fact, the finance minister has provided in a way for increase in oil price hike, too, as the current outlay in subsidy along with the scheduled increase in diesel price should help better manage the oil price volatility.

The FM has done a commendable job in balancing the compulsions of fiscal prudence and welfare schemes in a pre-election year. The five per cent increase in surcharge on corporate tax will likely impact BSE Sensex earnings by a limited two per cent. At the same time, the additional allocation of Rs 10,000 crore towards food security is surely worth the while if it brings relief to India's rural poor. The introduction of inflation indexed bonds or national saving certificates will provide a hedge against inflation.

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Kaku Nakhate
President & Country Head, Bank of America Merrill Lynch