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Will this Budget pull India out of economic slump?

Source: PTI  -  Edited By: Nandita Malik
February 01, 2020 18:41 IST
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The actual expenditure will only be marginally higher and hence, the multiplier effect will be muted.

Economy

Illustration: Dominic Xavier/Rediff.com

Economists have offered mixed views on the Budget with some going public with their disappointment for not taking adequate measures to boost growth, while others said it is on expected lines.

"In the back drop of low growth and calls for explicit stimulus to pump-prime the economy, the Budget disappoints on many counts again," small-sized private sector lender RBL Bank's economist Rajni Thakur said.

 

Acknowledging multiple spending announcements on health, rural, education and infrastructure sectors, she said the actual expenditure will only be marginally higher and hence, the multiplier effect will be muted.

However, Kotak Mahindra Bank's Upasna Bhardwaj said fiscal posturing is on expected lines and pointed out to the 10 per cent nominal GDP growth target as a factor which will aid sentiment.

The many income tax tweaks should help in boosting consumer confidence and demand, raising hopes of for growth revival, she added.

However, Thakur doubted the same, stating that two tax regimes with optionality for personal tax, as in case of corporate taxes, only makes the structure "more complicated".

Domestic brokerage firm Geojit Financial Service's economist Deepthi Mary Mathew also said the budget does not meet expectations.

"For consumption revival, the finance minister mainly focused in the adoption of new tax regime. It needs to be looked into whether the new tax regime will be enough in reviving the consumer spending," she said.

The budget was presented at a time when the growth rate is set to slip to a decadal low of 5 per cent in FY20, and efforts are on from all ends to help revive growth process.

The equity markets have reacted negatively to the budget and closed over 2.5 per cent down.

Captains of various sectors of industry on Saturday welcomed the Union Budget and provided suggestions to the Finance Minister Nirmala Seetharaman.

President of Tirupur Exporters' Association Raja M Shanmugham termed the budget as a people-oriented one.

Appreciating the focus on agriculture and farmers’ welfare, wellness and education and skills, Shanmugham, in a statement, said the measures announced in the budget would help overall development of economy.

He said the allocation of Rs 100 lakh crore for investment in infrastructure would lead to cut in logistics cost.

"As of now, poor logistics is one of the hindrance factors for attaining the export competitiveness by our units," he said.

Welcoming the proposal of setting up a National Technical Textile mission at an outlay of Rs 1,480 crore, he said it would boost the manufacturing of technical textiles in the country, he said.

The fund allocation for the Amended Textile Upgradation fund was only Rs 761.90 crore when the pending claims to the industry is to the tune of Rs 8,500 crores, he said and added that this would not attract the industry to go for modernisation.

Shanmugham expressed hope the government would consider and address the issue.

Convenor (economic affairs and taxation panel), Coimbatore Zone CII G Karthikeyan said the budget was presented with a recessionary phase in the background and hoped that there would be some big ticket reforms and tax cuts.

It is a welcome move that all-round allocations made in health care, renewable energy, education, technology-related advancements would not only benefit society at large but also help in pushing aggregate demand.

"We need to wait and see whether these will suffice in...spurring growth," Karhikeyan said.

A long standing demand of increasing deposit insurance of banks has been met with the limit per deposit increasing from Rs 1 lakh to Rs 5 lakhs, he said.

It is a good move to see that start-up ESOPs (employee stock ownership plan) have been tax-deferred and it remains to be seen whether these measures would push demand, consumption, and private investment and help the economy turn around, he said.

Head (treasury) of Lakshmi Vilas Bank R K Gurumurthy said tinkering with the personal tax and some structural changes in the way DDT (dividend distribution tax) would work are cosmetic benefits that the small and medium investor will like.

The worry is that there was no specific mention of bank recapitalisation, which when read with RBIs Financial Stability Report that NPLs (non-performing loans) could still haunt banks, could raise concern and cripple the ability of banks to lend, he said.

Gross and net borrowings are marginally higher.

Market may be able to absorb the incremental borrowing without much impact, he said adding that overall, it was a compact Budget.

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Source: PTI  -  Edited By: Nandita Malik© Copyright 2020 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.
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