This budget is a transformative one and if it's able to deliver what it intends to, it will usher high and well-diversified growth. The 9-pillar approach which focuses on the government's key priorities gives a lot of clarity on what the government is trying to achieve. It rightly focuses on boosting rural demand and providing social security to the needy sections of the society, thereby trying to bring in inclusivity and tackling the stress in the Indian agrarian sector which is an imperative requirement in a huge country like ours. The budget is primarily focused and centered around the fiscal consolidation target and the ease of doing business. The fiscal deficit looks real and credible, so they have not only kept the 3.50% sacrosanct but have adhered to this in spirit as well. The impetus on infrastructure and investment via higher allocation to the performing ministries - Transport and Road sector, Power and Railways are likely to prove quite productive. On the financial sector reforms, giving a statutory basis for the monetary policy committee framework and amendment in the SARFAESI Act 2002 are steps in the right direction. There is a perceived disappointment on the allocation of only Rs. 25,000 crores towards the recapitalization of PSU banks and this is where more fund allocation will clearly be required. The reference to formation of Banking Board Bureau and consolidation of PSU banks is a positive step for further strengthening of the banking sector. The government's commitment to reduce its stake below 50% in IDBI Bank may pave the way for more stake reduction in other PSU Banks as well. On the taxation front, keeping the service tax rates unchanged is a welcome surprise while taxing dividend income over Rs. 10 lacs is a right step of taxing the super rich. In the period of revenue headwinds, unchanged corporate tax rates is positive and I think we are on course for reduction of corporate tax rate to 25% as and when exemptions are phased out, which will bring in more certainty. Coming to the numbers, the growth in the planned expenditure of 20% vis-a-vis the overall expenditure increase of 11% is positive on a qualitative basis.
However, some revenue assumptions which need to be monitored closely are
1) Oil at USD 35 pbl
2) Revenue collection via amnesty scheme, and
3) Strategic disinvestment of Rs. 20,500 crores.
Overall, we still think that the assumptions are fair and reliable in the current context.

The good news for the bond markets is that the gross borrowing number at Rs. 6 trillion (market expectation Rs. 6.35 trillion) and the net number of ~ Rs 4.25 trillion augurs very well and that the government has stuck to the fiscal deficit target with the numbers looking quite credible. Also given the global and India growth slowdown, RBI may be prompted to take a forward looking view on the emerging CPI trend and go in for a 25-50bps cut in Repo Rate in the near term.