FM Nirmala Sitharaman is in an unenviable position. She is going to present Budget 2025 — her eighth consecutive one — under trying circumstances that place conflicting demands at her table. One, she has to stimulate growth and generate employment, especially blue-collar employment. Two, in order to stimulate growth she has to fuel consumption which is slackening, especially in the high-volume urban sectors and to raise consumption, she can offer income tax relief. By the way, even India Inc has urged the minister to provide income tax reliefs so that people spend.
But providing relief on the direct tax front would mean the government has to sacrifice revenue which she needs for spending on infrastructure, which will pave the way for long-term growth as well as generate employment. She could also resort to increased borrowing but that would mean loosening the fiscal strings a bit. The Narendra Modi government has endeavoured to maintain fiscal deficit with a strict hand. But experts suggest that this time the finance minister could perhaps make an exception for the sake of growth of the economy.
Fiscal discipline fixation could be jettisoned this time
How prudent will it be to strictly follow the 5% fiscal deficit target and go on collecting taxes, cold shouldering the growth compulsions? “The government has been able to maintain its fiscal deficit target for the past two-three years. For a growing economy like India, I think the government can a little bit more aggressive stance for pushing for that consumption that GDP growth rate. We have a huge population and consumption is definitely going to support the economy. That could possibly reduce the dependence on the global economy as well. We are in a comfortable zone as far as the fiscal deficit is concerned. This time we can perhaps take that little bit of leeway to push consumption, cut taxes to a certain extent and give that benefit to the common man,” Gaurang Shah, VP, Geojit Financial Services told the media.
To revive the animal spirits in the economy
One of the structural strong points for India’s economy is a big domestic market, which helps it to be less dependent on the global markets for growth. Mohit Gang, co-founder, Moneyfront agreed with Shah on this point. “The fiscal strings are in the hands of the government and there is no harm in going a little loose on the fiscal side if you want to revive the animal spirits in the economy. So the government has to take that calculated call,” remarked Gang.
FM Nirmala Sitharaman is presenting Budget 2025 — her eighth — under trying circumstances and headwinds over all of which she does not have control. Market analysts and investment experts think that the government should shed fiscal discipline fixation this year and the FM should loosen her purse strings to support growth and towards that end she has to stimulate consumption in a sluggish economy. Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
