“The prime focus of the budget needs to be revival of domestic consumption as it has been badly hit by the demonetisation drive,” says Dharmakirti Joshi, Chief Economist at Crisil, adding that bolstering faltering investment demand should be another priority area in the budget. Joshi feels that some windfall gains from demonetisation can provide one time fiscal space to the government (in FY18) to offer sops needed to kick-start the economy. Higher consumption is needed to address the under-utilisation of India’s manufacturing industries. The RBI’s recent survey paints a rather gloomy picture of demand conditions, especially in the running (January-March) quarter.
Higher consumption is needed to address the under-utilisation of India’s manufacturing industries. The RBI’s recent survey paints a rather gloomy picture of demand conditions, especially in the running (January-March) quarter.
Many believe that the FRBM committee headed by N.K. Singh has likely recommended the range (rather than the fixed rate) within which fiscal deficit can safely be incurred. Although the range formula might still expect the government to live within its means, at the same time it would provide the government some room to offer temporary relaxations to support the economy. “So an additional spending window can be created if the target is recommended (by the committee) to be relaxed to 3.5%,” says Crisil.
Girish Vanvari, Partner at KPMG, feels that there are three conflicts that the government faces. One is populism which is thought to be required for winning elections. The second is to kickstart the economy and finally achieving these within the confines of lower fiscal deficits. And how the government resolves these issues adequately is what the budget is going to be all about.