Embracing Uncertainties

A higher FY21 fiscal deficit is expected, at least the way things are poised now, landing at least around this year’s provisional deficit of 9.1% (which itself, given historical trends, could be revised upwards), if not higher. In such circumstances it is natural to assume that government debt levels will rise. Furthermore, given that 3/4th of the deficit financing is planned to be sourced domestically – not to mention the sheer size of the financing required – bond yields should remain sticky in the coming year.
Apart from some tariff rationalisation to support exports, the broader budget honestly seems to more or less echo the last one. It wouldn’t be entirely wrong to say that it raises more questions than it answers.  Read More…

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