Spread the love

The interim Budget due next week is expected to have some measures and higher budgetary allocations for the agriculture and social sectors. The government may also focus on job creation and infrastructure investments.

But if the government goes for too much of populist measures, it may have difficulty in managing its fiscal math. November data showed fiscal deficit stood at Rs 7.17 lakh crore. India has witnessed growth in direct tax collection at a healthy pace of 16.5 per cent, with both corporation tax and income-tax collection growing at around the same pace.

Unfortunately, the growth in indirect tax collection has been slower than expected. The government had forecast a budget deficit of 3.3 per cent of gross domestic product (GDP) for this fiscal year. However, inflation is likely to remain stable going forward.

Consumption demand is improving gradually in the country and markets across urban and rural belts are seeing positive trends. The rural market has been growing gradually over the past few years and have even become bigger than the urban market.

India’s consumption has been relatively weak in recent quarters, amid fragile growth in disposable income. The government’s core revenue expenditure plays an important role in determining rural buoyancy.

Any effort from the government to help the farm sector, including measures such as increasing crop MSP and introduction of income support mechanism for farmers amid enhanced allocations for farmer welfare programmes will give the much-needed boost to the rural sector.

To further support the agricultural sector, the government may increase incentives for adoption of solar water pumps by farmers for agriculture-related power consumption. The government may also announce additional allocations for development of the irrigation infrastructure, management of soil health and ensure better availability of farm credit.

Besides, the mega health insurance programme for the poor and massive spending on rural infrastructure will continue to strengthen the rural economy and boost consumption demand. There is a buzz that the government may double income-tax exemption threshold from Rs 2.5 lakh to Rs 5 lakh. Any maneuvering on this front will support consumer demand as it will increase the purchasing power of individuals.

With an increase in rural demand, agricultural inputs such as fertilisers, pesticides and farm equipment are likely to get the boost. The growth in fast moving consumer goods (FMCG) and auto sectors will get a boost from the revival of rural demand and new product launches. The consumption story in India is still intact and the capital investment cycle is yet to commence. Going forward, strong consumer demand, government expenditure and a pickup in investment activity should spur growth in the economy.

Spread the love

By udaen

Leave a Reply

Your email address will not be published. Required fields are marked *