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Union Budget Review & Investment Outlook - Feb 2019

Key Points:

Budget provides a fiscal dose to consumption

  • From economic perspective, the crux of today’s budget can be summarized by the stimuli provided through Farm Income Support and Tax Rebates & Deductions to Low / Middle Income Class. More than half the country's families will receive some cash benefit: 120 mn Small & Marginal Farmer Families and 30 mn Low / Middle Income Salary Taxpayers. The stimuli or a fiscal boost, as may be used interchangeably, amounts to nearly 0.5% of GDP, as demonstrated below.
  • Break up of Fiscal Boost.
      Rs bn % to GDP
    Farm Income Support 750 0.4
    Tax Rebate & Deductions 232 0.1
    Total 982 0.5


  • How would the above get funded? Following are the likely sources basis budget documents: Increase in Direct Tax / GDP (0.2%) and Indirect Tax / GDP (0.1%) while there is an expenditure compression of 0.1% of GDP assumed in the budget on items other than the two new schemes. To achieve the higher revenue collection, the GST growth has been pegged at 18%, much higher than what has been achieved so far.
  • The quality of expenditure, purely from the point of view of sustainability of economic growth perspective, had marginally deteriorated – Capital Expenditure is likely to reduce by 0.1% of GDP. Thus, the Budget is positive for Consumer businesses but not so for capex / infra oriented businesses.