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Budget in the times of slowdown: What are Sitharaman's options?

Budget 2020: Economists suggest India's real GDP growth would weaken further in Q3 of the financial year due to slow economic activity in the first two months of the second half. The last time India witnessed a GDP growth of less than 5 per cent was in the fourth quarter of FY13 when it grew at 4.3 per cent

twitter-logo BusinessToday.In   New Delhi     Last Updated: February 1, 2020  | 08:05 IST
Budget in the times of slowdown: What are Sitharaman's options?
Budget 2020: The IMF or International Monetary Fund recently lowered India's growth estimate for 2019 to 4.8 per cent from 6.1 per cent in October 2019 on the back of a sharp decline in consumer demand

Union Finance Minister Nirmala Sitharaman will announce her second budget speech today amid concerns over India's sagging economic growth. Economic growth declined to a five-year low of 4.5 per cent in Q2 of FY20. Economists suggest India's real GDP growth would weaken further in Q3 of the financial year due to slow economic activity in the first two months of the second half. The last time India witnessed a GDP growth of less than 5 per cent was in the fourth quarter of FY13 when it grew at 4.3 per cent.

FULL COVERAGE: Union Budget 2020

GDP growth rate

Amid such poor economic scenario, it becomes imperative for the government to take bolder reforms. "The government should take steps to improve the institutional structure by removing obstacles that constrain growth. Undertaking difficult and bolder reforms of land, labour, regulations, governance, the business environment, and the public sector will not help in reducing the cost and improving the ease of doing business in India but also unleash India's economic potential in future," says Rumki Majumdar, Economist, Deloitte India.

Majumdar adds that necessary amendments should be made to simplify the GST structure, rationalise the rates, and ensure a seamless flow of input tax credit, among others. "This will go a long way in improving compliance and competitiveness." Experts suggest simplifying the GST would help the government realise its revised its monthly GST collection target of Rs 1.15 lakh crore for January and February each and Rs 1.25 lakh crore for March.

"The budget must place priority focus on enhancing the competitiveness of the Indian manufacturing sector and expanding its potential to generate large-scale jobs for the country's workforce. The onus must be on increasing the share of the manufacturing sector to 25% of GDP from the current 16% and accelerating the integration of India with global value chains," says Prakash Tulsiani, Executive Director & CEO - CFS & ICD, Shipping & Investor Relations, Allcargo Logistics Ltd.

Creating an investor-friendly regulatory environment, ensuring single-window clearances for businesses and removing tax roadblocks can go a long way in easing business sentiment in the country, adds Tulsiani.

The IMF or International Monetary Fund recently lowered India's growth estimate for 2019 to 4.8 per cent from 6.1 per cent in October 2019 on the back of a sharp decline in consumer demand, the stress in the NBFC sector and sluggish credit growth. As the FM presents Modi 2.0's second Budget today, the industry will be keeping a close eye on the Centre's vision for the current fiscal year.

Also read: Budget 2020: Date, timings, where to watch, expectations from Modi govt's most challenging Budget

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