Budget 2020 India: My guess is that the disappointment of stock market was probably because there were no measures for immediate revival.
What I like (about the Budget) is that the government’s thrust on agri and rural has not slowed down this year. A lot more clear focus on where the money will be spent. And when I look at these items, the payback for the investment in these items will be the highest in the long-term. Nothing is like a short-term handout. Everything is being done in a structural manner which will have long-lasting impact. The flip side is that you won’t see anything tomorrow. If you look at what this Budget has for me in the next two or six months, it is not enough.
The whole thrust on technology, the words, Artificial Intelligence, IoT, machine learning, which was mentioned three or four times in the Budget I have never heard that before and I would have presumed that they are not too nice to talk about, but there is clear intention to support technology. Education and skill expenditure at Rs 1 lakh crore is really a positive thing. Structural changes are for long-term but nothing will happen tomorrow. One can look at it either as glass half full or half empty.
The auto industry, which is a very important part of manufacturing, was looking at measures that could immediately spur demand for automotives and all that needed to be on the demand side and the supply side. There is nothing to spur demand automatically tomorrow. What is being looked at is how do we increase manufacturing export and how do we do import substitution along with the whole manufacture of network products, which means being part of the network i.e. the whole global value chain and supply chain. One of the big things that India has been talking about for the last year, year-and-half is about manufacturing moving out of China and to India. That blueprint has to be defined. It has to happen with a clear blueprint on what will make India an important, desired alternative to China.
For that, logistics becomes very important and right now we know that in India, logistics is very inefficient. To make this happen, we have to make our logistics very efficient in comparison to China.
My view would be that probably more could have been done in reviving demand. Some short-term immediate measures were required now, but we do understand that the government has limited fiscal room. Last year’s fiscal deficit was now pegged at 3.8%, I would have probably kept the deficit again at 3.8% rather than 3.5%.
That would give a little bit more room to do things that will revive the demand. In terms of incomes, in terms of extra expenditure or in terms of a little bit more near income tax reduction because right now the economy needs revival in demand. My guess is that the disappointment of stock market was probably because there were no measures for immediate revival.
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For auto industry specifically, scrappage policy would have been a nice thing. It doesn’t come without costs attached. Scrappage policy would have revived demand and given how high the GST per unit sales in automobiles industry is, that probably would have been revenue neutral in terms of tax collection and lot of positivity would have come on account of that.
The second measure that would have been nice for the auto industry, with BS VI cost increase, therefore, GST also goes up then it at least it could have been made GST neutral.