Union Budget 2019: Nirmala Sitharaman faces daunting task of boosting growth with fiscal prudence, says India Ratings report

Elevating economic growth in times of fiscal constraints is the 'most daunting task' for finance minister Nirmala Sitharaman who is presenting her maiden budget next week, a report has said

Press Trust of India June 28, 2019 19:55:14 IST
Union Budget 2019: Nirmala Sitharaman faces daunting task of boosting growth with fiscal prudence, says India Ratings report
  • The India Ratings report raised concerns on the off-balance sheet borrowings by the government

  • It said the fiscal consolidation must continue in line with the fiscal road map laid out earlier

  • The budget needs to come up with a five-year roadmap on tax reforms especially for corporates, the agency said

Mumbai: Elevating economic growth in times of fiscal constraints is the "most daunting task" for finance minister Nirmala Sitharaman who is presenting her maiden budget next week, a report has said.

The interim budget has already gone public with the target of getting fiscal deficit at 3.4 percent.

"Based on the current trend in GDP and tax-/non-tax revenue growth, we believe adhering to the fiscal deficit target at 3.4 percent will be difficult without squeezing expenditure," India Ratings said in a note on Friday.

It can be noted that government expenditure has been one of the biggest drivers of consumption growth and in turn aided growth process in the last few years, when private investments have been lacklustre.

Union Budget 2019 Nirmala Sitharaman faces daunting task of boosting growth with fiscal prudence says India Ratings report

Representational image. Reuters.

The report also raised concerns on the off-balance sheet borrowings by the government, stating while such moves help contain fiscal deficit closer to the glide path, but is an "expensive way of mobilising resources".

It said the fiscal consolidation must continue in line with the fiscal road map laid out earlier.

In FY19, general government (both Central and states) fiscal deficit at 6.9 percent was much higher than Fitch-rated 'BBB' peer group's median of 1.9 percent, it pointed out. Similarly, government debt at 69 percent of GDP was 1.84 times that of 'BBB' rated peer group's median, it said.

It said it would be "interesting" to look at the steps the budget would announce to expand the tax base and resolve the tax revenue currently in disputes, and added that tax laws continue to be complex even after attempts at simplification.

On taxation, it pitched for a new direct tax code to simplify tax legislation, remove exemptions and widen the tax base to be included in the budget proposals.

The budget needs to come up with a five-year roadmap on tax reforms especially for corporates, the agency said.

Clarity on capital infusion in the public sector banks, removal of the roadblocks that have crept into the bankruptcy laws, and encouraging/incentivising banks to buy good quality assets of NBFCs, will go a long way in easing the current woes of the financial sector and reviving the private corporate/non-corporate capex, it said.

There is a need to look at agriculture beyond food security alone if we were to find a solution to the agrarian crisis, it said, advocating direct transfers in the interim.

Follow full coverage of Union Budget 2019-20 here

Updated Date:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Opposition leaders, activists slam BJP over promise of 'free vaccine' in Bihar, say party 'deriding people'
India

Opposition leaders, activists slam BJP over promise of 'free vaccine' in Bihar, say party 'deriding people'

Some also drew the Election Commission into the debate, asking whether the BJP could be allowed to make such an announcement when preparations for the polls were already underway

With 3.2% expansion in Q1, China becomes first major economy to return to growth since beginning of pandemic
World

With 3.2% expansion in Q1, China becomes first major economy to return to growth since beginning of pandemic

Chinese exporters have benefited from the economy’s relatively early reopening and global demand for medical supplies, according to a National Bureau of Statistics report

Rape of minor in Punjab triggers political slugfest; Congress, BJP accuse each other of selective outrage
Politics

Rape of minor in Punjab triggers political slugfest; Congress, BJP accuse each other of selective outrage

The BJP attacked Rahul Gandhi and Priyanka Gandhi Vadra of being selective in cases of atrocities against women and questioned their 'silence' over the alleged rape and killing of a six-year-old girl in Punjab