Mumbai: Swiss brokerage UBS on Tuesday said the Centre should stay away from populist spending ahead of the 2019 general elections to adhere to fiscal deficit targets.
“The government needs to keep a lid on fiscal pending, which could be tricky in the run-up to the 2019 elections,” it said in a report. Concerns on GST collections, states’ rising fiscal deficit and the risk of populist spending ahead of 2019 is keeping the markets on “tenterhooks” about a possible fiscal slippage, the report added.
It can be noted that last week, Prime Minister Narendra Modi had affirmed his administration’s commitment to meet the fiscal gap targets this year as well. The note from the brokerage comes amid reports of the government discussing a hike in minimum support prices (MSP) for grains in line with the announcement of delivering 150 per cent of the costs as returns for farmers.
It also pitched for not pursuing easy monetary and fiscal policies due to the tightening of financial conditions globally. “We believe a rate hike now will avoid the risk of steeper tightening in future,” UBS said, adding that it expects another 0.25 per cent hike in key policy rates in FY19 and possibly in the August monetary policy review itself.