The Modi government's first full year Budget to presented on Saturday is unlikely to be affected by the outcome of the Delhi elections, and will be a fiscally prudent one, feels brokerage house Nomura.
"Kick-starting public investment in infrastructure and incentives for Prime Minister Modi's medium-term initiatives such as Make in India and Digital India are likely to be the highlights," says the Nomura note to clients.
Following are the seven things Nomura expects from the Budget:
* Fiscal discipline: Government to meet fiscal deficit target of 4.1 per cent of GDP in FY15 and target 3.6 per cent in FY16.
* Net market borrowings to rise slightly to Rs 4.8 lakh crore in FY16 from Rs 4.5lakh crore in FY15, and gross borrowing to rise to Rs 6.5 lakh crore from Rs 6 lakh crore (due to higher redemptions).
* Public investment in infrastructure to be the key focus: Capital expenditure to rise from 1.8 per cent of GDP to 2.5 per cent of GDP. To be financed by pruning subsidies, increased asset sales.
* Better quality of fiscal consolidation as subsidies fall due to lower oil prices (from 2 per cent to 1.4 per cent of GDP) and capital outlay on infrastructure increases.
* An incentive for Prime Minister Modi's flagship programs such as renewable energy, clean India mission, make in India, digital India and the smart city initiative.
* An increase in the Centre's transfer to states (in line with 14th finance commission recommendations), greater flexibility for states in spending money transferred under the centrally sponsored schemes and compensation to states for GST implementation.
* RBI to target CPI inflation within a band of 4 per cent +/-2 per cent over the medium term, announce the setting up of a bank holding company, postpone GAAR and extend the withholding tax of 5 per cent on interest paid on rupee securities.
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