Budget 2020: What India Really Needs is A Booster Shot of Credibility

As we roll around to another budget, the mood is dark. Although there’s been some chatter around the December data suggesting signs of the first “green shoots”, it’s clear that 2020 is going to be a tough year on many expected lines – fiscal slippage, unemployment, poor manufacturing.

But there are also new challenges; a surge in inflation, an unknown geopolitical situation and extremely poor tax collections.

A good barometer of expectations this time, is the lack of it. There’s no usual blitz of what the budget will or will not bring in the pink papers, no top ten demands from the FM and hardly any time has been spent by equity research houses around a budget primer.

So, realistically, what can the government and the finance minister do in this budget?

Two big sized problems face finance minister Sitharaman at this point. A challenging fiscal situation that has worsened on the back of sluggish tax revenues on the one hand and a weak economy, on the other.

The number one attack point should be growth. The government could increase spending to hot-wire growth – higher tax benefits for housing in order to rekindle housing demand and supply and upping the spending on rural infrastructure would be great initiatives.

Remember, housing constitutes around 6.5% of GDP and fiscal stimulus to housing and infrastructure can boost both aggregate demand and supply.

The Wire
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