Analysts rule out pre-budget rally; sops for rural sector likely

Budget 2019 :Analysts have ruled out significant changes to corporate tax and personal income tax rates and a runaway pre-interim budget market rally. On the other hand, they expect the government to dole out some populist policies, especially for the rural / farm sector while presenting the interim budget scheduled for February 01, given that the country is heading towards general elections over the next few months.

“Because of its drubbing in recent state elections and concerns about farm distress, broad expectations are for the government to present a populist budget, announce a farm package and miss its fiscal deficit targets. Even with a farm package, we don’t expect the government to budget a deficit of 3.3 per cent of GDP (gross domestic product) or higher, as that would signal a pause or a deviation from fiscal consolidation,” wrote Sonal Varma, managing director and chief India economist at Nomura, in a co-authored report with Aurodeep Nandi.

Outside of the farm sector, Nomura expects a focus on micro, small and medium enterprises (MSMEs) and the middle class and rules out any big tax changes in the interim budget. They, however, suggest major changes to the existing tax structure, if any, will be announced in the final budget to be presented in June/July 2019.

Analysts at Motilal Oswal Institutional Research, too, feel that there is little scope for the government to significantly lower direct and indirect tax rates.

Interim Budget 2019