Fiscal deficit target would be around 5.5 pc: HDFC Bank report
There is a growing market fear that the fiscal deficit in 2008-09 may be as high as 6-6.5 per cent but the budget to be unveiled in early July may surprise with a figure of around 5.5 per cent, HDFC Bank has said.
"We believe that the budget will take a step towards fiscal consolidation and the fiscal deficit target will be in the neighbourhood of 5.5 per cent as against market expectations of 6-6.5 per cent," the bank said in its report.
The market fears of a high fiscal deficit are based on the opinion that the Government would continue with stimulus packages to prop up growth, it said.
The report said that the net and gross borrowing of the Government was unlikely to be very different from the 3,08,647 crore and Rs 3,61,782 crore figure announced earlier in the year.
The private sector bank predicted a roll-back (at least partially) of the indirect tax reductions announced as a part of the December 2008 and February 2009 fiscal stimulus.
"These along with the natural revenue buoyancy associated with economic recovery should keep the interim revenue target supported through FY 10," it said.