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MOSL: Morning India (26/December/19): 1. EcoScope (Where will the government cut its spending?); 2. AU Small Finance Bank (Growth momentum robust); 3. Telecom (Government may cut license fees to 5% from 8%)

MOrning India (26/December/19): 1. EcoScope (Where will the government cut its spending?); 2. AU Small Finance Bank (Growth momentum robust); 3. Telecom (Government may cut license fees to 5% from 8%)

 

Today’s top research idea

EcoScope: Where will the government cut its spending? Adverse economic impact would depend on states and CPSEs

• While the government fell short of INR1.3t receipts in FY19, there is an almost unanimous belief that FY20 too might see a significant shortfall in receipts, leading to either spending cuts or breach of fiscal deficit target.
• Against this backdrop, spending cuts are inevitable, which was seen on food subsidy and transfer to states. But this does not say that farmers received lesser subsidy as it was routed through the FCI.
• Historical data suggests that similar large shortfalls were seen in FY14 and FY15, but they were adjusted. Similarly, the general government (center + states) may choose to adjust its spending and keep the fiscal deficit target unchanged at 6% of GDP for FY20 - 3.3%/2.6% of GDP for the center/states.

Piping hot news

Government braces for ₹50k crore disinvestment shortfall

The government is unlikely to complete the privatization of Air India Ltd, Bharat Petroleum Corp. Ltd (BPCL) and Container Corp. of India Ltd (Concor) by end-March, leaving a ₹40,000-50,000 crore hole in its budget. This is likely to further impair the government’s ability to meet the fiscal deficit target of 3.3% of gross domestic product (GDP), in a year where both direct and indirect tax collections have been well below expectations amid an economic downturn that has hit a six-and-half-year low of 4.5% in September quarter.