Fiscal stimulus adequate to boost growth: Nirmala Sitharaman on Budget 2020
Union Finance Minister Nirmala Sitharaman feels that she has given a stimulus package for the economy, while at the same time she has tried balancing the priming of the economy with prudential norms.
The Centre has planned to spend Rs 4.12 lakh crore on capital expenditure, which many economists have criticised is insufficient to push up GDP growth suffering from low demand and investment. India’s GDP grew by 4.5 per cent in the July-September quarter this fiscal, the slowest in more than six years.
The government argues that the higher outlay represents 15.33 per cent more spending when compared to revised estimates for the previous year.
“I won’t predict whether it (the stimulus) would be enough (to stimulate growth) … (but) I am clear that the extra expense for infrastructure will have a positive impact on jobs and investment,” Sitharaman said.
The finance minister had earlier come out with an infrastructure pipeline worth Rs 102 crore to be implemented between 2020 and 2025, mostly in the energy, roads, housing and irrigation sectors. But analysts say most of the money for this is expected to be put up by the private sector, who till now have shown a distinct aversion towards infrastructure investment, given the slowdown in the economy and low rates of return.
“We have been advocating a far larger infrastructure push to bring the economy out of its slow growth mode and to protect us from the vagaries of the global economy, which too is slowing down at an alarming pace,” said Prof Arun Kumar, Malcolm Adiseshiah chair at the Institute of Social Sciences.
The finance minister, however, said the Centre intended to spend Rs 2.83 lakh crore on agriculture and rural roads alone and this should be seen as an impetus to revive the rural economy.
The minister also said that she aimed to bring a second public sector Equity-Traded Fund or ETF.
“I am going for the second (ETF) and expecting success in that as well,” she said.
In the budget, she said that the Centre proposes to float a new Debt-ETF consisting primarily of government securities.
“This will give retail investors access to government securities as much as giving an attractive investment for pension funds and long-term investors.”
The Centre’s increased borrowing programme entails Rs 7.96 lakh crore, an increase of 13.15 per cent over the current year’s budget estimates.
Officials said this meant that the government would have to look for broadening its credit base and move towards retail borrowing through bonds and ETFs, in which individuals could participate and not just banks.
More capex
The Centre has planned to spend Rs 4.12 lakh crore on capital expenditure
Several economists have criticised that this is insufficient to push up GDP growth suffering from low demand and investment India’s GDP grew at 4.5% in the second quarter of FY20, the slowest in more than six years.
The Centre argues that the higher outlay represents 15.33% more spending compared to revised estimates for the previous year