Some of the most pressing challenges ahead of new Finance Minister Nirmala Sitharaman is to bring the economy back on track as she gets ready to present her first Budget on July 5.
Top Economic Challenges for FM to Resolve:
- A slowdown in growth rate, rising inflation, low investment, consumption and questions over job creation are major hurdles the economy is currently facing.
- It is widely expected that the Finance Minister will continue with the provisions of the Interim Budget with a few changes.
- Some expenditure on account of expansion of the PM Kisan and pension schemes (for farmers and traders) will increase as these have been approved by the Cabinet and allocation has to be made in this Budget. Also, allocation for these will fulfil the key poll promises made by the BJP.
- Relief in personal income tax, reduction in corporate tax from 30 per cent to 25 per cent, special provision to push adoption of cashless transactions, bank recapitalisation and lowering fiscal deficit to 3.5 per cent of the gross domestic product (GDP), while implementing the recommendations of the 7th pay commission payout of Rs 102 lakh crore will be major concern of the financial minister’s agenda
- Oil and gold would require special attention. Rising crude prices would have to be addressed and a roadmap drawn out. Meanwhile, the increase in gold imports will also need to be managed, as high foreign exchange outflow would make balancing the trade deficit difficult for the finance minister.
- The Goods and Services Tax is in the process stage and more clarity is expected in the budget, in terms of the government’s approach to implement it from July 1, 2017.
In Budget, 2019 Budget should be used as an opportunity to initiate fiscal reforms which will push up the potential growth of the economy by enhancing labour, capital and total factor productivity. And, as fiscal stimulus is required for a cyclical recovery in the short run, some fiscal deficit slippage is likely and plausible as long as the fiscal consolidation path ahead is set firmly.