Budget 2019: 'Prioritise reflation through fiscal push'

Radhika Gupta, CEO, Edelweiss AMC

Since the interim budget in February 2019, reassessment of fiscal stance is on the cards. With the slowdown of the domestic sector and subdued private sector sentiment, the need of the hour is to lift government spending that can offset private sector slowdown. In addition, there’s shortfall of tax revenue target which the interim budget pegged at 17% but turned out to be just 8% for FY19. Hence turning the tables to 13% growth in FY20 (interim budget) could be challenging.

The domestic slowdown has resulted in low consumption while investment and exports remain weak. Meanwhile, domestic inflation is benign and outlook is more correlated with global food prices, which remain subdued. Hence for now, reflation through fiscal push can be prioritised over reforms.

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Affordable housing could be the priority area along with some incentives for banking sector to revive credit growth and tame down liquidity crunch for NBFCs. We expect 80C benefit extending to debt mutual funds to encourage retail participation in bond market. Over the past two years, the government spending was more on the infrastructure and less on spending in the rural/social sector. However, the focus may now change to the latter.

Income support scheme is already underway and ramp up in affordable housing may also be needed to get the desired impetus to the real estate sector.

The author is the CEO of Edelweiss AMC.