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View: FM’s part done, nation has to respond

FM Sitharaman is in an unenviable position with most parameters like consumption, investments, manufacturing, GDP and even agriculture at lowest rates of growth in the past several years. Yet she has provided leadership to the ministry and remained focused on her job, even during times of extreme pressure.

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Last Updated: Feb 03, 2020, 08.00 AM IST
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Harsh Goenka
A lot now resides on how the economy responds, both to the stimulus packages announced earlier and to the initiatives from this budget.
By Harsh Goenka

The budget was something to look forward to amidst a catastrophic virus, economic slump, an impeachment trial and the loss of one of sports’ biggest stars. Over the past eight months or so, the FM has been very active, making interventions at various junctures to find a way out of a tightening economic crisis. The corporate tax rate cut was a major step as were the efforts to get the banking and finance industry get back on track. The telecom industry was saved with a lifeline and exporters were given a duty refund scheme to make them more competitive. To her credit, we could say that a good amount of what could have been addressed has been done to a great degree without waiting for a budget date.

The Economic Survey tabled in the parliament warned of a potential rise in fiscal deficit gaps due to the dependence on non-tax revenues from actions like disinvestment. While FY20 did not see much on this front, we may see more disinvestment of entities in FY21 with Air India and BPCL being the early candidates. Besides this, the survey also forecasted a 6-6.5% GDP expansion next year, which I am sure, will be seen as par for the course in present circumstances. To a great degree, the potential to use the regular tools for fiscal management are constrained. With inflation high, there is very little room to manoeuvre interest rates further. Increasing government spends on capex is also not easy given the low tax revenues and not much scope exists for further stimulus packages given the fiscal deficit situation.

In the backdrop of this, it is commendable that the FM has addressed a large number of touchpoints in this budget, striking a perfect balance between caution and optimistic reforms. The budget speech touched a variety of segments and covered the themes in great detail. The budget speech was structured under Aspirational India, Economic Development and Caring Society — signifying its holistic and inclusive approach to the way India grows. From solar power proposals for farmers to making horticulture a district-specific agenda, to electronics manufacturing, expressways and smart metering besides the continued focus on railway expansion and pipelines, it was a comprehensive approach from the FM. There were many important changes to banking as well enabling market access for banks and reforms for NBFCs. A taxpayers’ charter is proposed, which the FM spoke about both during and after the budget, and I am sure it would help make the tax environment better.

FM Sitharaman is in an unenviable position with most parameters like consumption, investments, manufacturing, GDP and even agriculture at lowest rates of growth in the past several years. Yet she has provided leadership to the ministry and remained focused on her job, even during times of extreme pressure.

The most important purpose of the budget is fiscal management and consequently, the fiscal deficit. At a target of 3.5%, the FM has succeeded in keeping the deficit gap from the benchmarks set earlier at similar levels for FY21. Overall, when seen comprehensively along with the interventions made earlier, this budget is on the right track in terms of impact and intent.

A lot now resides on how the economy responds, both to the stimulus packages announced earlier and to the initiatives from this budget. I remain hopeful that the worst is behind us and we should move forward with a progressive mindset. The FM has done her part. Now the nation has to respond.

(The writer is Chairman, RPG Group. Views expressed are personal)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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