The Growth Question | Budget 2019
Six experts weigh in on Finance Minister Nirmala Sitharaman's maiden budget and assess if enough has been done to put a flagging economy back on track.
Q. How would you categorise this budget? Is it a growth budget? Will it stimulate the economy?
A.
D.K. Joshi
The accent is on fiscal consolidation, with the budget resisting the temptation to spend aggressively to bolster growth. That said, one needs to read between the lines of growth-propping measures. First, the fiscal restraint will make way for a growth-supportive monetary policy. Fiscal policy is the key signal to the Reserve Bank of India (RBI) under the inflation targeting regime and we expect it to cut the repo rate by 25 basis points in its policy meet in August. Second, bank recapitalisation of Rs 70,000 crore and support to non-banking financial companies (NBFCs) will enhance their lending capacity, crucial to stimulate growth. The partial credit guarantee from the government for securitisation will facilitate purchase of NBFC loans by banks and reduce stress in the sector. With these measures, we expect GDP growth to start looking up by only the second half of this fiscal. With good rains and soft oil prices, it could cross the 7 per cent mark. If not, we're looking at sub-7 per cent growth again, even with budgetary efforts.
N.R. Bhanumurthy
I would say it's growth-oriented with a medium-term focus. Budget 2019 is focusing more on the processes (ease of doing business). Considering its aim to achieve $5 trillion in five years, it needs to address many structural issues. The budget suggests that the growth in the country needs to be backed by more private investments while the government focuses on developmental issues (ease of living). The proposals on increasing investments in infrastructure could stimulate the economy. The government's scaling up of some of the rural development schemes should stimulate demand in the economy.
Sajjid Chinoy
The Centre's fiscal deficit target for 2019-20-adjusted for asset sales-is almost the same as last year. So there is no additional fiscal impulse for growth directly from the budget, which is a relief since with the total public sector borrowing, at 8-9 per cent of GDP, consuming virtually all household financial savings, there was no fiscal space for expansion. However, the budget will help growth through two channels. First, fiscal discipline will bring down interest rates (already reflected in falling bond yields) and help the RBI's monetary transmission. Second, some part of the public sector bank recapitalisation funds will constiÂtute 'growth capital' releasing the supply constraint of loanable funds.
Vikram Kirloskar
It addressed solvency, governance and liquidity issues to boost investors' confidence as well
