IndexThe 2018-19 budget will be crucial from several points of viewSummary of the current fiscal situationSpecific budgetary expectationsThe 2018-19 budget will be crucial from several points of viewIn Firstly, it will be the first budget to fully reap the benefits of demonetisation (through increased direct fiscal push) and increased indirect taxes due to GST. Secondly, 2018 will feature state elections with eight states going to the polls. Third, it could be the last “full” budget before the 2019 general election and certainly the last budget that gives the government a chance to deliver on the election promises it made in 2014. Common sense might tell us that it will be politics, rather than the economy, driving the budget. priority. However, the government appears committed to fiscal discipline and the constraint of sticking to a conservative deficit target will limit its options. We now believe that the fiscal deficit for fiscal 2018 will be 3.2% and that the target for next year will remain on the declining path of 3%. And the background? Perhaps the national economy no longer fits into the clichéd Goldilocks scenario. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Rising oil prices for one is a key risk and could significantly contribute to a widening current account gap that could transmit to fiscal imbalances. Rural distress appears to have intensified across the country and will be a challenge that the government will have to address comprehensively. Indeed, the agricultural sector is likely to feature high on the list of budget priorities in fiscal year 2019. Whether programs and appropriations aimed at the rural sector are labeled as “populist” vote-seeking gestures or instead seen as a genuine response to a real problem is a matter of individual prejudices and predilections. Summary of Current Fiscal Situation As per currently available data According to data (up to November 2017), India's fiscal deficit has already exceeded the fiscal target and touched 112% of BE. At the same time, last year, the deficit was 86% of the full-year target. While there may be a slippage in some items on the revenue side, better resilience in direct tax collection, possibility of special payment of dividends by the RBI and other PSUs and higher-than-budgeted disinvestment proceeds could work from bearing. On the other hand, an aggressive front-loading of spending in the first half of fiscal 2018 could impact the quality of spending in the second half. Overall, based on all these factors and given the reduction in With the government's extra borrowing in the market from Rs 50,000 CR to Rs 20,000 CR, meeting the budgeted fiscal deficit target now seems more likely. In fiscal 2019, the government is also expected to stick to a target of 3.0%. Going forward, non-tax revenues may improve in fiscal 2019. The government is likely to factor in (we think legitimately) a significantly higher tax-to-GDP ratio than this year. However, it is still likely that divestments will do the heavy lifting both this year and the next. It is important to monitor how strategic disinvestment plans in 36 PSUs (which have been identified) will bear fruit. Please note: this is just an example. Get a custom paper from our expert writers now. Get a custom essayFrom the perspective of on bond markets, the.).