By Jyoti Roy,
The Union Budget 2021-22 surprised all market participants as there was significant boost provided to government spending despite the shortfall in tax collections.
Overall government spending for FY2021 has been revised to 34.5 lakh crore as against Budget estimates of Rs. 30.4 lakh crore despite a significant shortfall in tax collections for the year.
Revenue receipts for the year have been revised to Rs 15.5 lakh crore against Budget estimates of Rs. 20.2 lakh crore.
Disinvestment proceeds too have been revised sharply down to Rs 32,000 crore from Rs. 2.1 lakh crore. As a result, the fiscal deficit has been pegged at 9.5% for FY21.
The fiscal deficit for FY21 is well above consensus estimates of ~7% as the government is actually looking to spend more than budgeted despite a shortfall in tax collections.
Personal and corporate tax rates have largely been left untouched and the Agriculture cess too has been implemented in a very non-disruptive way.
Gross borrowing figure at 12.7 lakh crore is also not significantly higher than the revised figure of Rs 12 lakh crore which will ensure that G Sec yield does not move significantly higher.
Overall the Budget is slightly negative for the bond market though it is positive for equities.
(The author is DVP, Equity Strategist at Angel Broking Ltd)