Budget 2017 Is Going To Be ‘Market-Neutral’, Says Morgan Stanley
According to a Morgan Stanley report, India’s Union budget is going to be a "market-neutral" event as policymakers are likely to continue focusing on fiscal consolidation.
Morgan Stanley’s India Strategist Ridham Desai believes there has been a decline in the budget's influence on short-term market performance.
Market participants will have to deal with a fair amount of volatility on the budget day though even this volatility has been declining over the past 25 yearsRidham Desai
As per the report, the pace of fiscal consolidation will be slower than what was planned, and the government will find it difficult to cut back aggressive spending post-demonetisation. It says the central government is expected to target a fiscal deficit of 3.3 per cent of the gross domestic product in 2017-18, as compared to 3.5 per cent in 2016-17.
The report claims that going forward, "as the impact of the currency replacement programme fades, the economy will return to a path of gradual recovery, led by improvement in consumption, public capex and a reduced drag from external demand".