FM faced with excessive hopes on ‘Solve-All’ Budget: ASSOCHAM

Despite the tax revenue showing smart growth despite demonetization, the biggest challenge before the government is to revive the urban consumer demand and provide a huge stimulus to the rural economy which had to bear the maximum impact of the note-ban. Inflation may be down, but it has to be seen in the context of glut in many crops, especially vegetables, resulting from excess output and cash withdrawal in November.

“If there is one sector which needs the maximum of government attention, it is the rural landscape, “The paper said. However, there are competing demands amidst high expectations built around a large scale relief to individual income tax payers and the corporates seeking reduction in the corporate tax rate to 25 per cent.  The individual tax payers are expecting a big rise in the exemption limit and not a token amount of Rs 10,000-20,000.

With near consensus reached on the GST roll out from July, the outcome in terms of tax collection may be uncertain even as the Centre remains committed to fill the shortfall of the states.  “There are bound to be teething troubles, though in the long run, lot more benefits would accrue to the economy”.

Yet another fall out is the digital space which is pinning high hopes on the Budget in terms of lot more investment commitment for the internet and broadband expansion and other telecommunication infrastructure. Besides, the merchants and the technology enabling firms are expecting big bang sops and announcements in the Budget.

“Even though the agriculture sector is expected to perform well in terms of production thanks to good Monsoon and useful winter showers, the industrial production and services remain subdued.  Cut in interest rates do make a difference, but that alone would not be enough to revive demand –led investment.  The banks reeling under the non-performing assets and the scanner of the investigative agencies would remain cautious in lending, however much they are flush with liquidity”, the paper noted.

Commenting on the macro picture, an ASSOCHAM spokesman said, “The way expectations are soaring high, especially in the stock market , the Finance Minister may find it tough to come up to them ,under conflicting demands.”

With the Railways Budget being merged with the Union Budget,  the onus of providing sufficient funds for the country’s largest transporter would also fall on the Finance Minister, somewhat, though the responsibility of raising funds commercially for a huge capital expenditure would continue to be on the Railways.

“Besides the financial implications, the Budget is expected to come out with a lot of policy and procedural changes for improving ease of doing business”, the paper said.  In fact, a smart strategy would be to fix lot of the policy issues which could be great enablers for growth.