Union Budget 2015 is part populist, part growth oriented

The first full Budget of the Narendra Modi-led BJP government is best described as part populist and part growth-oriented.

While the political loss in Delhi assembly elections clearly shows up in the Budget with a focus on continuing with populist measures like MNREGA, the Budget also makes up for the slowdown in private investments by increasing public expenditure.

This, however, will have fiscal implication with Finance Minister Arun Jaitley extending the fiscal deficit target of 3 per cent from two to three years. This will have negative implications for interest rates as well as on India's ratings by global rating agencies.

HITS

• A new monetary policy framework beyond January 2016
• Investment holding company for PSU banks
• Roads and railways to fire up growth
• Higher GDP target of 8%-8.5%
• Corporate tax reduction from 30% to 25%
• Setting up of National Infrastructure and Investment Fund

• Fiscal deficit target of 3% extended from two to three years
• Continuation of populist measures like MNREGA
• No capital allocation for PSU banks