India Budget Analysis

Union Budget 2016

Overall, while the Budget is muted from an economic and pro-business perspective, it does focus on some of the hard areas of the economy that needed a boost. If the focus proves fruitful, it will provide a stronger platform to push through a more reforms-oriented agenda going forward.

The crucial question is what will drive growth in FY17? The theme for next year would most likely be consumption driven growth. Urban demand is clearly picking up, as also seen by rising retail loans, car sales and consumer durable growth. The effects of the pay commission on domestic consumption has historically been positive and we believe that is likely to play out again this year. This is further expected to be strengthened by OROP payouts. On the other hand, normal monsoons and the additional spending by the government in the rural and social sectors, as envisaged in the Budget Proposals could see revival in the rural demand. The demand boost is also expected to come from the spends of higher allocations earmarked for roads and railways expansion.

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