Indian Budget 2019: Despite the waning relevance of the Union Budget in recent years, Budget 2019 was being highly anticipated. With an even stronger political mandate, NDA II was expected to be bolder in its economic vision for the country, especially against the backdrop of a steady slowdown in GDP growth rate, the need to urgently create many more (and higher quality) jobs, and give a much-needed fillip to investment, especially in the manufacturing sector.
Unfortunately, the best that can be said at this time is that part A of the Budget speech did touch upon most of the important challenges facing India at this time, and going forward, some course corrections could be seen in areas such as higher education and rental laws, and perhaps better utilisation of assets such as surplus land with public sector government entities.
The Economic Survey had reconfirmed the importance of private consumption and its perfect correlation with per capita national income. While the reverse (i.e. higher private consumption leading to higher national per capita income, on account of creating a virtuous cycle of growth) was not spelt out in the Economic Survey, there is enough evidence from across the world that an occasional stimulus is needed to give a slowing economy fresh growth momentum.
The government could have given such a stimulus in this Budget through one or several steps that could have included reduction in peak corporate tax rates across board, reduction of GST rate on automobiles and a select range of consumer durables and appliances (though the GST Council could still take it up in its next meeting), and increased government spending on infrastructure.
The taxes thus foregone and increased spending could have been made up by a bolder statement of reduction in non-productive government expenditure, disinvestment of government assets (not limited to public sector enterprises alone), and elimination of FDI restrictions in all sectors other than some specific segments relating to national security.
In the absence of any uniquely creative or bold measures or even a stated intent to be bolder and be more innovative in thinking, there is nothing in this Budget that will give any additional stimulus to private consumption across board or even in any specific major consumer product or services category.
There is an interest reduction in individual income tax for such payees who buy an electric vehicle using a loan. This (along with FAME II subsidy) can give further boost to sales of EVs but with the very low volume base at this time, its impact on the overall automobile sector would be negligible.
Hence, the fate of private consumption (across most consumer goods categories) is once again left in the hands of our rain gods. A decent monsoon would do more for the economy and India’s consumer spending than what Budget 2019 is expected to do.
(The author is Chairman, Technopak Advisors)
