FUELLING ECONOMIC GROWTH
Finance Minister Nirmala Sitharaman presented her second Union Budget in the midst of a desperate economic situation – a slowdown that hasn’t seen the bottom yet; consumption, private investment and exports refusing to pick up and even public expenditure suffering a setback due to lower than expected tax collections in FY20. It was imperative to kick-start at least one or the other growth engines of the economy to bring the fast decelerating economy back on track. Instead, Sitharaman aimed at two engines – consumption and investment cycle – in the hope that disposable income in the hands of individuals and money with corporates would restart the two engines. She answered the call with a new personal income tax regime offering more money to tax payers, protectionist import tariff hikes to strengthen corporate balance sheets and a generous amnesty scheme to unlock ₹9.41 lakh crore of direct tax disputes. Business Today spoke to a dozen leaders including noted economists, CEOs, tax experts, exporters and bankers to gauge the mood of the country.
“The apparent contradiction is that expenditure-GDP ratio is increasing by 0.33% in spite of fall in tax-GDP ratio”
Rathin Roy, Director, National Institute of Public Finance and Policy
The experts include Kiran Mazumdar-Shaw, Chairperson and Managing Director, Biocon; Preetha Reddy, Vice Chairperson, Apollo Hospitals; Rathin Roy, Director, National Institute of Public Finance and Policy; Mukesh Butani, Managing Partner at BMR Legal; Ashu Suyash, Managing Director and CEO, Crisil; R.S. Sodhi, Managing Director, Gujarat Cooperative Milk Marketing Federation (Amul); Saugata Gupta, Managing Director, Marico; Surendra Rosha, Group General Manager and CEO, HSBC India; Vishesh C. Chandiok, CEO, Grant Thornton India; Nimesh Shah, Managing Director and CEO, ICICI Prudential Mutual Fund; Sachchidanand Shukla, Chief Economist, Mahindra Group; Partha Chatterjee, Dean-International Partnerships, Professor and Head, Economics Department, Shiv Nadar University.
Here’s what they had to say on whether Budget 2020 will revive Indian economy:
Are Budget announcements enough to pull the Indian economy out of slowdown?
ASHU SUYASH: There is some support to growth, but not enough to give a material impetus in the short term. That means, the government is opting to not spend its way out of the slowdown. That said, it maintains a rural spending focus. As the government is still eyeing the long term, it has pushed capex. The multiplier impact of this will be positive, but lagged. In the absence of growth kickers, the pick-up in growth in fiscal 2021 is expected to be largely base-effect led and supported by somewhat better farm incomes (led by a good rabi crop), PM-KISAN and delayed impact of monetary easing.
There is extensive push in infrastructure, which is clearly a must for boosting economic sentiments. There is an open handed budget allocation to health, sanitation, environment, agriculture and blue economy, which are
