India's 2016-17 growth will not meet optimistic budget

Significance

He faced pressure to drop the government's commitment to reducing the fiscal deficit in the next few years to 3.0% of GDP, from 3.5% in 2016-17. The economic circumstances seem appropriate for a fiscal stimulus, but Jaitley has decided against this.

Impacts

• Divestment receipts will probably undershoot targets in 2016-17.
• The health of public sector banks will deteriorate further if the government forces them to increase infrastructure lending.
• High GDP growth figures despite rising economic strain will fuel suspicions about official data.