Income tax cuts welcome, but fine print reveals growth stimulus is missing

If we were hoping for a major stimulus in the budget to counter the slowdown and breathe some life in the markets, it is not there.

Published: 01st February 2020 05:33 PM  |   Last Updated: 01st February 2020 07:58 PM   |  A+A-

Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman during the post-budget press conference in New Delhi.(Photo | Parveen Negi, EPS)

If we were hoping for a major stimulus in the budget to counter the slowdown and breathe some life in the markets, it is not there. In fact, the Budget speech, one of the longest in recent years, was sounding as tired as the Finance Minister by closing time. 

The spends on infrastructure projects by the government and for the farm sector are not substantially higher than last year, in fact in agriculture there appear to be cutbacks. This is not good for growth and jobs. Obviously, the first reactions from the markets were not positive with the Sensex going down by 700 points immediately after the conclusion of the finance minister's speech.

ALSO READ: LIVE BUDGET - Nirmala Sitharaman announces tax cuts and an LIC stake sale!

The expected relaxation of income tax rates in slabs upto Rs 15 lakh has been a welcome boost to the overstretched middle class, as it will put more money in their pockets, and hopefully crank up demand to some extent. It however comes with ifs and buts, and taxpayers are not supposed to have taken any exemptions to qualify for these cuts. It is a Rs 40000 crore relief nonetheless and so is the abolishing of the Dividend Distribution Tax on companies, which were paying 15 per cent currently.

On fiscal planning, by holding the deficit at 3.8% of GDP, the government has kept things under control, but one can see little in the Budget that will ease the current difficult times.


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