By B Gopkumar
It will be Modi 2.0 government’s first budget, but all eyes will be on Nirmala Sitharaman’s first budget speech as the finance minister. While the Dalal street welcomed the Modi government, it isn’t a smooth ride for the government. Multiple micro-macro factors have come into play in FY20 including geopolitical tensions, global trade wars, and volatile crude prices. All of which has a huge impact on global as well as domestic growth.
Everyone expects the FM to distribute sweet savoury. However, the key challenges ahead of FM that will need immediate action would be to arrest the dwindling GDP growth, addressing the agrarian distress and fixing the financial sector woes. A clear five-year road map on tax reforms, especially corporate tax rates, and measures to bring the stuck capital back into the production process by fast-tracking the resolution of non-performing assets of the banking sector will go a long way in reviving the incremental private capex and growth of the economy.
However, elevated banking sector NPAs and now the defaults on debt repayment in the non-banking finance sector (NBFC) has created a crisis in the financial sector. Infusing more capital into the public sector banks, removing the roadblocks for the speedy resolution of IBC cases and incentivising banks to buy good quality NBFC assets may ease the financial sector woes. Similarly focusing on shadow banking and housing finance companies by creating a liquidity pool would act as a catalyst for growth. Any announcement to this effect would be a welcome step. While everyone expects the government to be spending to revive growth, FM will have to exercise fiscal prudence.
Meanwhile, the withdrawal of long-term capital gains tax would be cheered by the market. This would lead to higher equity participation by companies and help in channelizing household savings into the economy.
Sectorwise expectation:
Automobiles
BFSI
Cement
Capital Goods
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