The Narendra Modi-led government is likely to focus on infrastructure spending in its full budget for fiscal 2020, analysts at Reliance Securities said in a note.

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The brokerage house expects an expansionary budget from Modi 2.0 mandate, primarily to support slowing economic growth.

Fiscal deficit for FY20 can be seen in the range of 3.8 percent to 4.3 percent vs. BE of 3.4 percent of GDP (a slippage of 40 basis points to 90 basis points). One basis point is one-hundredth of a percentage point.

“We expect strong direct taxes measures in context of taxation of e-commerce companies, transfer pricing and evasion in corporate taxes. Also, the government’s focus is expected to be more on regulating GST compliance and bringing fuel under the GST regime. We do not expect any major rate rationalization in the direct or indirect taxes,” said Reliance Securities in the note.

The government can allocate additional capital expenditure to the tune of Rs 30, 000 crore to Rs 50,000 crore for rural and urban infrastructure in order to reinvigorate growth as well as provide labour intensive employment, said the report.

With reckoning normal monsoon, the brokerage expects inflation to be largely contained at sub 4 percent levels. Stress in the financial sector coupled with a dovish monetary policy is expected to put a resistance to strong upside in the yields from current 6.8 percent - 6.9 percent levels.

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First Published:Jul 5, 2019 9:19 AM IST