The fiscal deficit target for financial year 2017-18 was ‘slightly disappointing', said Ananth Narayan of Standard Chartered Bank.
Finance Minister Arun Jaitley on Wednesday pegged the FY18 fiscal deficit target at 3.2 percent, which was a tad higher than Standard Chartered's expectation of 3 percent. The target, however, was lower than the market expectations of 3.4 percent, Narayan said.
He is however, enthused with the quality of expenditure proposed in the Budget with its focus on the rural economy, infrastructure and low-cost housing.
“… what we do notice is that the quality of expenditure which is being proposed by the finance minister is actually quite good. There is a substantial increase in expenditure on the capital front; there is a lot of money going into rural, agri, into infrastructure. Inclusion of low-cost housing into infrastructure has been very positive for the economy,” said Ananth Narayan, regional head of financial markets at Standard Chartered Bank.
Jayesh Mehta of Bank of America Merrill, however, said that the Finance Minister surprised the bond markets by his fiscal deficit outlook.
“As far as bond markets are concerned, fiscal deficit expectation was 3.5 percent and may be 3.3 percent. They surprised the market by saying 3.2 percent, which is good”, said Jayesh Mehta, head of treasury at Bank of America Merrill Lynch.
With the Union Budget now out of the way, the focus will shift to the key Reserve Bank of India's (RBI) monetary policy review on February 8 and global events, especially U.S. President Donald Trump policy stance.
“There are a lot of headlines coming in globally, particularly from the President Trump and the U.S. They will continue to dominate movements across the globe.”
Narayan expects the central bank to cut interest rates by at least 25 basis points in the upcoming policy review.
“From a bond market perspective, the bigger event would be the (RBI) policy as to whether we see a 25 basis points cut or are they waiting for the Fed (U.S. Federal Reserve) to move. And the market is going to be slightly jittery till the policy is out,” added Mehta.
Also Read: Lower Government Borrowing To Bring Down Interest Rates, Says HDFC's Mistry
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