Markets Expecting A Rural-Focused Union Budget

New Delhi:  Indian investors are expecting the upcoming Union Budget to be focused on boosting rural consumption and demand as wider relief to taxpayers is unlikely given government’s restricted fiscal space.

Brokerages predict that the government may not be able to announce any deduction in personal income tax, but its focus on social sector programmes such as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), National Rural Livelihood Mission (NRLM), among others, is likely.

“In line with the past budgets, social sector measures are likely to gain traction, as previously signalled by a sustained push towards electrification of villages, sharpening MGNREGA focus, improved quality and quantity of healthcare availability, education, skill training, creating vocational institutes etc,” a Centrum report said.

Rural spending by the Central government grew 20.8 per cent year-on-year in the first seven months of FY20, marking the highest growth in the past 11 years. Besides, the share of rural spending in the centre’s total spending rose sharply from 11.3 per cent in FY19 to the 8-year high of 13.3 per cent in FY20.

However, fiscal deficit remains at elevated levels which is worrying for the investors as it curtails the government’s ability to spend. Fiscal deficit till November 2019 accumulated to Rs 8.1 trillion, up 12.7 per cent from November FY19.

Several experts have said the government is set to miss the fiscal deficit target of 3.3 per cent.

The faltering consumption impulses had been weighing on the growth since the onset of this fiscal year. However, the slowdown became pronounced in Q2FY20, thereby coercing the government authorities to intervene by announcing the corporate tax rate cut, Centrum said.


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