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Budget 2015-16: A Reasonable Roadmap to Spur Medium-term Growth

India Ratings & Research (Ind-Ra) believes that the government through the present budget has mainly been looking at accelerating growth and investments in the economy. Focus on ease of doing business in India by simplifying business procedure/indirect tax structure, laying down a four-year timespan to reduce corporate tax to 25% from 30%, encouraging financial savings as opposed to physical savings, securing better life for senior citizens are all aimed at reinvigorating and strengthening the green shoots visible in the economy.

Ind-Ra believes that the creation of a national infrastructure fund and higher allocation to road and railways are also steps in the right direction. However, the main worrying factor is the quality of fiscal deficit, which has shown no signs improvement according to the FY16 budgeted estimate. The Economic Survey 2014-15 advocated for improving the quality of fiscal deficit. Ind-Ra is of the opinion that FY16 growth number looks plausible. However, the success of 3.9% fiscal deficit target hinges on the economy growing around 8% and achieving the disinvestment target of INR695bn. The government missed the FY15 disinvestment target by INR320.75bn.

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