The broad contours of Budget 2012-13 were centred around increasing taxes, keeping subsidies under control and giving a thrust on kick-starting the investment cycle. The Budget has tried to touch upon everything and may end up being inflationary in nature (bad for interest rate cuts) while not achieving any significant growth prospects. The robust tax revenue growth of 19.5 per cent, which is supported by the 200 basis points increase in excise duty to 12 per cent and measures to increase tax collections from services, gives an impression of fiscal consolidation but is optimistic (looking at the weakening industrial production).
And, so are assumptions on non-tax revenue and disinvestment targets. Non-tax revenue receipts are estimated at Rs 1,60,000 crore, including Rs 42,000 crore from 2G licence re-auctions. We are uncertain about the receipt of the same in FY13 given multiple legal hurdles that could delay the auction. The divestment target of Rs 30,000 crore could also be at risk given that it has fallen far short of the target set in FY12.