MUMBAI: The Budget’s commitment to stick to the medium-term fiscal consolidation roadmap despite increasing allocation towards rural and infrastructure sector have surprised foreign brokerage firms. With state assembly polls lined up in five states, most of them expected the government to announce populist measures to overcome the pain caused due to note ban.
“Contrary to expectations of populism in the run-up to state elections and after demonetisation, the government is sticking to its path of fiscal consolidation, albeit at a less aggressive pace. The key message from the Budget is that the government has chosen macro stability over growth, despite the pressure to present a populist Budget. We see this Budget as prudent and popular, but not populist,” said Nomura.
BNP Paribas said that the deficit target set by the Budget for FY18 was lower than what the market had anticipated in view of the upcoming state polls. “Perhaps even more impressive is that Mr Jaitley was still able to announce some ‘goodies’ such as providing a record Rs 10 lakh crore in loans to farmers and boosting allocations to MNREGS jobs program which cover bulk of the population,” it added.
The markets responded positively on the Budget day led by sectors that are more driven by the domestic consumption story. After surging close to 2 per cent on Wednesday, both bourses closed with marginal gains on Thursday.