Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 3.5
Article rating: 5.0
Article rating: No rating
Article rating: 4.7
Article rating: No rating
Article rating: No rating
Article rating: 5.0
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 5.0


Re to hit 73 by Mar 2019; fisc target to be breached: Report

Author: PTI/Tuesday, September 11, 2018/Categories: Economy

Re to hit 73 by Mar 2019; fisc target to be breached: Report

Mumbai - India is the only major emerging market having a negative balance of payments (BoP) and the pressure is expected to sustain, a Swiss brokerage said on Monday, expecting the rupee to depreciate to 73 by March 2019.

Shortfalls in GST collection and divestments, coupled with state finances being under strain will take the consolidated fiscal deficit to 6.5% in FY19, against the government's budget estimate of 5.9%, UBS said.

A country's external balances is one of the key factors influencing the currency and weakness in it has led to a 12% depreciation in the rupee till now, it said.

"We revise our FY19 current account deficit (CAD) forecast to 2.7% of GDP in FY19 from 2.5%, much above the sustainable threshold. This would put India's overall BoP in a deficit of around 1 per cent of GDP, the first in seven years," the brokerage said.

Expecting pressures on the BoP to continue till FY20, it revised its year-end rupee level estimate to 73 against the dollar, compared with the earlier 66.

"If the external emerging market risks do not ease, or trade protectionism rises further, the rupee could weaken well past our FY19 year-end forecast," it warned.

The brokerage explained that as global uncertainties escalate, emerging economies like India which are running twin deficits (CAD and fiscal) are likely to face heightened financial market volatility as well as downside risks to their potential growth outlook.

It said after the strong start in the first quarter, economic growth will slow down to 7-7.3% in the second half of the fiscal.

"We believe headwinds, including tighter financial conditions, high oil prices, slowing global growth and a still muted private corporate capex recovery on legacy issues of high debt and weakened balance sheets will weigh on India's growth momentum," it said.

It estimated the full year economic growth to come in at 7.5%, up from 6.7% in the year-ago period.

The note said inflation will be at "manageable" levels but underlined the monitor the risks coming from the ongoing rupee depreciation.

It expects India to miss its consolidated fiscal deficit for fiscal year 2018-19 on difficulties on GST collection,  divestments, as also stretched state government finances.

"There is a risk that the combined fiscal deficit remains elevated at 6.5% in FY19 (versus the government's budget estimate of 5.9%) on concerns related to revenue shortfall (on GST, divestment etc), higher states' fiscal deficit, and the risk of populist spending ahead of 2019 elections," it said in the note.

It can be noted that the government has committed to reduce its fiscal deficit to 3.3%.

The brokerage said it expects a shortfall of up to Rs 30,000 crore in GST collections for FY19, unless there is a significant increase in tax compliance or the GST council agrees with the recently passed amendments related to unallocated compensation cess to be shared between the Centre and states.

It expects the Reserve Bank of India to hike its key rates by 0.50% more due to financial stability concerns on rising oil prices, capital outflows, populist spending and political uncertainty.

Print Rate this article:

Number of views (317)/Comments (0)

rajyashree guha


Other posts by PTI
Contact author

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free