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Budget may raise spending to revive economic growth
Prime Minister Narendra Modi’s government is expected to raise spending on infrastructure and cut some personal tax in its 2020/2021 budget, to spur consumer demand and investment, government sources and economists said.
New Delhi
Growth slipped to 4.5% in the July-September quarter, worsening the job prospects for millions of youth entering the workforce each year. Despite cuts in corporate taxes and monetary easing by the central bank, investments have failed to pick up.
Economists and investors say fiscal stimulus in the budget for the year beginning April 1 and an increase in spending on roads, railways and rural welfare could revive growth. The budget will be delivered to parliament on Saturday.
A weak economy and the wave of anti-government protests have increased the chances of a fiscal stimulus in the budget, said Shilan Shah, an economist at Capital Economics in Singapore.
“That would provide a small boost to growth over the coming quarters, at the cost of putting upward pressure on bond yields,” he said in a note.
Troubled Assets Relief Programme-like govt fund likely for NBFC relief
The government is likely to unveil in the Union Budget a Troubled Assets Relief Programme (TARP) similar to what the US initiated during the Lehman financial crisis in 2008.
Under the proposed scheme, the troubled or stressed assets of the non banking finance companies (NBFCs) will be bought by a government fund to revive the sector.
A high level review meeting was held on Monday, chaired by Prime Minister Narendra Modi. A final decision will be taken on the matter.
The US government had initiated the TARP at the height of the Wall Street financial crisis of 2008 to stabilise the financial system and restore economic growth. TARP was rolled out to accomplish targets by purchasing troubled companies’’ assets and stock.
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