Given below is a quick comment by Mr. Somnath Mukherjee, Managing Partner & CIO, ASK Wealth Advisors.

The positive surprise on the fisc for FY22 did not happen – the upside on tax collections, especially corporate and oil taxes, were mitigated by lower disinvestment proceeds (a gap of ~1 lac crores) and some expansion in expenditure. As a result, the positive surprise that was widely expected in the fisc didn’t materialize. Next year’s numbers though have been pegged at fairly modest level. Total budgeted expenditure is up <5% (over Revised Estimates for FY22), total revenue receipts are also budgeted at a modest 6% growth. Add to it the very modest expectation of GDP growth (~11% nominal), and there seems to be headroom on both revenue and expenditure side later in the year for the government to intervene.

But, and it’s a sizeable but, a lot depends on global oil prices. Almost a third of the excess (over budget) tax collections this year were on account of oil taxes. Oil, if it goes to $120-130 will put pressure on the extraordinary excise/customs duties on oil, unless the government is able to pass on another 30-40% increase in the pump price of diesel/petrol. With inflation raising its head on multiple counters, it will be a tough act to pull through.

In terms of economic impact, it’s a work-in-progress. The flat revenue expenditure budgeted is almost certain to be revisited in the middle of the year – especially allocations for key social expenditure like PM-KISAN, NREGA and subsidies. 25% rise in capex budget is good, but heavily dependent on government’s execution capacities.

Bond markets should be wary, as they have shown in bond prices – the positive surprise on the fisc didn’t materialize for this year and the next year doesn’t seem fully baked (even though based on conservative assumptions). Solid Budget – from a “Budget” perspective, continuing the process of cleaner transparent budget exercise. Any flashes or big bangs will have to wait for how inflation pans out in the next few months.