Table of contentsBudget 2018-19 will be critical in several respectsSummary of the current fiscal situationSpecific budgetary expectationsBudget 2018-19 will be critical in several respectsFirstly, it will the first budget to fully exploit the benefits of demonetization (through increased direct taxation) and increased indirect taxes due to GST. Second, 2018 will be a busy national election year with eight states going to the polls. Third, this could be the last "full" budget before the 2019 general election and certainly the last budget that gives the government the chance to deliver on election promises made in 2014. Received wisdom might tell us that politics rather than Economy will determine the budget. priorities. However, the government appears committed to fiscal discipline and the constraint of sticking to a conservative deficit target will limit its options. We now expect the fiscal deficit for FY2018 to be 3.2 percent and next year's target to remain on the progressive path and stand at 3 percent. And the backdrop? The national economy may no longer be in the clichéd Goldilocks scenario. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Rising oil prices pose a major risk for one and could contribute significantly to a widening current account gap that could translate into fiscal imbalances. Rural distress appears to have intensified across the country and will pose a challenge for the government to address comprehensively. In fact, the agricultural sector will likely top the list of budget priorities in FY 2019. Whether projects and allocations for the rural sector are characterized as "populist" vote-seeking gestures or rather seen as a real answer to a real problem is a question of individual prejudices and preferences. According to data (up to November 2017), India's fiscal deficit has already exceeded the budgeted target and reached 112% of BE. This time last year, the deficit was 86% of the target for the entire year. While there may be slippage in some items on the revenue side, improvement in dynamics of direct tax collection, possibility of special dividend payout by RBI and other PSUs and disinvestment products higher than budget forecasts could serve as a buffer. On the other hand, an aggressive initial spending charge in the first half of fiscal 2018 could affect the quality of spending in the second half. With the government's additional market borrowing of Rs 50,000 cr to Rs 20,000 cr, meeting the budgeted fiscal deficit target now looks more likely. Also in FY19, the government is expected to stick to a target of 3.0%. Looking ahead, non-tax revenues may improve in FY 2019. The government will likely (in our view, rightly) factor in a significantly higher tax-to-GDP ratio than this year. However, it is likely that disinvestment will do most of the work this year and next. It is important to monitor how the strategic disinvestment plans in 36 PSU units (which have been identified) will bear fruit. Keep in mind: this is just a sample. Get a personalized article from our expert writers now. Get a Personalized Essay from the Perspective of In Bond Markets, the Need to Adhere to the.).