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It’s a good budget but what about the global economic downturn!

It’s a good budget but what about the global economic downturn!
Stock Market2 min read
There were expectations galore- on the tax front, on the financial front, on the manufacturing front and the social front.

Budget 2016 overall was a good budget barring a few flip-flops. Finance Minister Arun Jaitley’s core thrust was on the social sector to ensure that there was more money in the hands of the farmers to ensure an uptake in rural demand.

A reason why we saw him announce a slew of measures to make it more attractive, to be a farmer in India.

There was one more important thing that he managed to do here-bring more people under the tax net. While he judiciously chose to stick to the fiscal deficit target of 3.5% for 2016-17, one way he ensured this was definitely happening was by ensuring new people entered the tax net.

From announcing measures for cheap credit availability to farmers to allowing tax relief for people staying on rent to giving first time home buyers the much needed relief to buy their dream house, he also doubled investment in infrastructure with a special focus on creating the much needed roads-10, 000 kms of National Highways in 2016-17.

This budget has all the makings of a good blockbuster with thrust in all the right places to ensure that the government’s GDP target of 7-7.5% remains a reality.

While there were a few raised eyebrows in the form of increased taxes for certain luxury goods, including high end cars, one would argue that these are products that do not cater to the larger segment of the society and therefore of lesser relevance.

Fiscal prudence and consolidation remained the two keywords for Jaitley’s budget for 2016, a move that has now been widely acclaimed by not only industrialists but even the economists and the market.

The other important factor in this budget was his focus on how the government will now have a say on the country’s monetary policy that so far was the RBI’s domain.

With an expectation of a normal monsoon this year, including the increased focus on increasing farm output as well as the government’s continued commitment towards sticking to the fiscal targets, there could soon be a situation for the central bank to cut rates. This in-turn could be a huge fillip for the banks to cut their commercial borrowing rates and make it far more attractive for corporate houses to really open their purse strings wider.

However, what one really needs to be cautious about right now is the global economic situation. Global markets, including the big developed ones are visibly slowing down with some even slipping into recession.

How a turn of these events would impact several factors, including our exports, thereby the current account deficit in-turn the fiscal deficit is something that all the government’s top economists and bureaucrats will be keenly watching out. In fact, one should not be surprised if there is a mid-term revision of these fiscal targets given the global economic situation.

(Image: Indiatimes)

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