The expectation from Budget 2020 is that it will provide a stimulus to the staggering economy by spending on infrastructure (that leads to job creation and higher wages) and by putting more money in the hands of the people to rekindle consumption by reducing what 35 million Indians pay as income tax. The spending on infra route has a delayed cycle of impact because it takes time for the projects to come up and the ripple effect of jobs and consumption to take place. Putting more money in the hands of the people has a direct impact if people indeed spend the taxes they save. The problem in India is that consumption may have stalled due to the informal economy holding on to their cash and not spending it. While getting the informal part to formalize is a waiting game, it does look as if the government has little option but to let go of the Financial Responsibility and Budget Management (FRBM) target for financial year 2020-21 that restricts the fiscal deficit to 3% of the GDP.
Expense AccountLet's Talk MoneyMoney BoxPersonal FinanceJanuary 22, 2020by Monika Halan0Do student protests precede big reforms?
India needs a new growth push and unless we clean up the state intervention designed in an earlier era, the next push is difficult.