1. Atul Joshi, Managing Director & CEO Thursday, November 15, 2018
Union Budget FY16
Atul Joshi, Managing Director & CEO
Thursday, November 15, 2018

2. Macroeconomic Context before FY16 Budget
Domestic Context
Fiscal Health/ Public Finance
Low revenue base and high committed expenditure
Inflation
Food inflation declining but food inflation still a challenge
Infrastructure
Infrastructure deficit adversely impacting productivity and competitiveness of the economy
Manufacturing
Reviving manufacturing critical for creating employment opportunity
Currency and Balance of Payment
CAD as of now low, but will remain a risk
Global Context
India not immune to global development …
Global financial 2008/ Eurozone debt crisis
Geo-political upheaval impacting oil prices
Global GDP/ Trade growth

3. Union Budget FY16 - Highlights
Fiscal/ Public Finance
Fiscal deficit for FY16 pegged at 3.9% of GDP
Roadmap for fiscal consolidation outlined (3.5% and 3.0% in FY17 and FY18)
To set up public debt management agency
Inflation
Average consumer inflation to be 5%-5.5% in FY16 will open room for more monetary policy easing
Monetary policy framework agreement with the RBI to keep inflation below 6%
Growth
GDP to grow at 8-8.5% in FY16
Aim is to grow at double digit soon
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4. Union Budget FY16 - Highlights
Infrastructure
Investment in infrastructure to go up by INR700bn in FY16 over last year
To set up ‘National Investment Infrastructure Fund’
To allow foreign investment in alternative investment funds
Tax-free infrastructure bonds for projects in roads, rail and irrigation projects
5 ‘ultra mega’ power projects of 4000 MW each
Plan to build additional 100,000 km of road
Ports in public sector to be corporatise under Companies Act
Policy Reforms
Comprehensive new law on black money
Create a universal social security system
To bring a new bankruptcy code
To introduce a public contract resolution of disputes bill
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5. Union Budget FY16 - Highlights
Manufacturing
Goods and services tax by April 2016
Basic custom duty on commercial vehicle doubled to 20%
Reduction of custom duty on 22 items
To cut corporate tax to 25% over next four years (effective corporate tax in FY14: %)
Anti-tax avoidance rules GAAR deferred by 2 years and to apply prospectively from April 1, 2017
A national skill mission to consolidate skill initiatives spread across several ministries to be launched.
Online central excise and service tax registration to be done in two working days
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6. Current Expenditure Consistently Higher than Current Revenue
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7. Fiscal Deficit Has Improved …
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8. ….but not the Quality of Fiscal Deficit
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9. FM announced incremental investment of INR700bn
Budget numbers do not show this…..
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10. Net Tax/GDP Still on a Declining Trajectory
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11. Disinvestment Fallen Way Short of Budget Estimate
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12. Current Exp Moderating but Capital Exp Flat…
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13. Marginal Decline in Subsidies
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14. Interest Payment Continues to be Very High…
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15. Sustainability of Debt is Under Pressure....
Debt is Sustainable so long as the Rate Spread (nominal growth net of interest rate on debt) is significantly higher than primary deficit (fiscal deficit net of interest payment). This has been the situation between FY05 and FY08.
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16. Expenditure Reform Not Easy……
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17. In Sum Economy to Improve in FY16
Key Indicator
Trend in FY15
GDP Growth
To Improve
- Agriculture Growth
To Decline (Base Effect)
- Industrial Growth
- Services Growth
Fiscal Deficit
Marginal Decline
Currency
To Appreciate
Benchmark Yield (Interest Rate)
To Decline
Current Account Deficit
To Expand
Inflation
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18. India - Economic Outlook - FY15
 Key Indicators * F*
Real GDP factor cost (y-o-y % growth)
4.5
4.7
5.6
6.5
Agriculture
1.4
1.9
2.0
Industry
1.0
0.4
3.6
Services
7.0
6.8
7.3
7.4
Average Inflation (WPI)
5.9
2.7
2.8
Average Inflation (CPI)
10.2
9.5
6.4
6.0
Exchange rate (INR/$ March end)
54.39
59.6
61-62
63**
Year End Interest rate (10-year G-sec)
8.01
8.8
Current Account (% 0f GDP)
1.7
2.1
2.2
Fiscal deficit (center, % of GDP)
4.9
4.2
3.9
Gradual recovery
* Ind-Ra Forecast
** Average for FY16