Fiscal deficit target on expected lines: Madan Sabnavis

The projected fiscal deficit for the financial year 2014 at 4.8 per cent is more on the expected lines though it will need to be seen if the revenue collections would be according to schedule. The resulting net borrowing programme may not be a major concern for liquidity as it is around Rs 20,000 crore more than last year and it can be absorbed in the system.

There is no fear of any crowding out of private investment by the scale of government borrowing. But a lot will depend on how the Reserve Bank of India views inflation.

It is intriguing that the Budget still talks of raising Rs 20,000 through the MSS (market stabilisation scheme) bonds, indicating that a surplus of foreign funds is being expected, which will be good news if it does materialise given our current account deficit problems.

Finance Minister P Chidambaram has worked on a relatively higher growth rate of between 6.5 and seven per cent. This will determine largely whether or not the revenue targets are met.

Otherwise, the Budget looks fairly conservative and prudent with the expenditures too being in the appropriate channels. The subsidy bill too will not throw any surprise as we already have in place a policy of fuel prices.

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Madan Sabnavis
Chief Economist, CARE Ratings