Union Budget 2019 India: One of the topmost concerns is the prevailing scenario related to banking, finance and the liquidity crisis.
Union Budget 2019: The Narendra Modi government has won an overwhelming mandate for its second term in office. This has set the stage, for what many believe, possible big reforms to address India’s long-standing economic problems. Currently, the Indian economy is showing signs of a slowdown due to internal factors and is also buffeted by global winds in the form of trade-tariff wars and geo-political tensions. The Union Budget 2019, therefore, has its task set. So, what challenges should FM Nirmala Sitharaman pick up in her maiden Budget? Financialexpress.com reached out to leading economists and analysts to ask them what the government’s top two ‘doable’ priorities should be.
One of the topmost concerns is the prevailing scenario related to banking, finance and the liquidity crisis. This liquidity crisis has impacted not just some players in the financial domain but has also contributed to a slowdown in the real world with consumer lending being impacted. “The government should frame a comprehensive turnaround plan for banks, NBFCs and mutual funds to restore the health of the financial sector’, said Rupa Nitsure, Group Chief Economist, L&T Finance Holdings.
Another economist from a large lender – who declined to be quoted – also identified financial sector issues as top priority. The economist felt that it was important to recapitalise banks and provide confidence to banks to lend. Related to this is the financing available to MSMEs, which are critical for the economy and also for job creation. “The government should accept the recommendations of the UK Sinha Committee report on the actions for improving credit access to MSMEs. It will fire them up and with a significant size of economy and jobs being contributed by the sector, it is an imperative”, said Ranen Banerjee, Leader – Public Finance and Economics, PwC.
Not surprisingly, agriculture, real estate and land emerged as other top priority areas for others. All of them are fundamental to economic growth and in the case of land reform, critical to implementation of infrastructure projects. Vikas Vasal, National Leader – Tax, Grant Thornton LLP listed availability of land and quick transfer of title as a priority. Land reform was also on top of the list for Sandeep Raina, Vice President at Edelweiss Securities. Real estate ownership and transparency was important for Anita Gandhi, Whole Time Director, Arihant Capital.
Agriculture saw a number of proposals from these thought leaders. Radhika Rao, Sr. VP, Economist at DBS Bank suggested the government focus on structural support for agriculture and also ensure that MSPs reflected trading prices. Rupa Nitsure wants activation of e-NAM – the online trading platform for agri commodities – across the nation. PwC’s Ranen Banerjee sees direct sale of farmer produce without going through mandis as something that will also help food processing.
Ease of doing business, enhancing FDI inflows received attention too. Sanjeev Hota, Head of Research at Sharekhan, suggested that the government look at infrastructure reforms and spends through higher outlays. He also suggested focus on ease of doing business which could bring a multiplier effect on growth. Social investments such as housing and water for all were on his list. Vikas Vasal also suggested labour reforms and FDI liberalisation. “Indian entrepreneurs are very smart, think of ease of business”, suggested Sandeep Raina.
There were suggestions for other key reforms – DK Srivastava – Chief Policy Advisor – EY wants further rationalisation of GST. Bidisha Ganguly, Chief Economist at CII suggested direct tax reform, Direct Tax Code, removal of exemptions and strategic sale of PSEs. Arihant’s Anita Gandhi wants media – especially related to stock markets – to be better regulated. Chief Economist Sachchidanand Shukla of Mahindra Group stressed on credibility of budget numbers and said that government spending must start to address the sharp slowdown on the back of big expenditure cut and the election cycle. Focus on jobs and capex was important for Madan Sabnavis of Care Ratings. Sharekhan wants rural growth revival through fiscal support.
In the middle of this, they are keeping a keen eye on the fiscal front as well. DK of EY wants a solid medium-term plan for fiscal consolidation so that targets are not missed.