Sitharaman’s Budget To Focus On Key Developmental Areas

Union Finance Minister Nirmala Sitharaman will present the full-year budget for the year ending March 2020 on July 5.

It will be the first budget of the Prime Minister Narendra Modi government in its second term.

The interim budget for the year 2019-20 was presented by then Finance Minister Piyush Goyal on February 1.

It is believed that the budget will set the stage for reforms over the next five years that could see structural policy changes in areas such as land, labour, capital and entrepreneurship to attract investment, offer incentives to boost consumption, and spend public money on social infrastructure for equitable growth.

"While the coming budget may incentivise job-oriented private investment and focus on skill-development initiatives, the government is likely to persuade banks, particularly public sector ones, to slash interest rates in order to boost consumption," officials from the ministry of finance said.

It is also believed that the Reserve Bank of India could further lower lending rates to provide more room to commercial banks for cheaper loans, they said. The central bank cut the repo rate to 5.75 per cent on June 6, its third cut this calendar year.

"An indirect boost to consumption will also come through interest rate reduction. The policy rate has already been reduced by 75 basis points this calendar year. About 40 per cent of this has been passed on to the lending rates and the RBI may endeavour to increase monetary transmission further. One more reduction of 25 basis points in the repo rate may be considered later during the year," Dr DK Srivastava, chief policy adviser, EY India, said.

Srivastava further said the government will be focused on the rural economy for boosting consumption.

This budget is also likely to continue with the government's policy focus on rural India.

One of the key areas where the budget is likely to focus is unemployment, as the unemployment rate according to the Periodic Labour Force Survey (PLFS) report for July 2017 to June 2018 soared to 6.1 per cent.

Experts are of the view that budget could bring in reforms aimed at creating a tax- and business-friendly environment and the government could give several tax concessions to exporters, particularly to boost domestic manufacturing.

"Further, the budget might take some key decisions to boost the real estate sector which could have a multiplier effect on the economy as it would spur demand for steel, cement and labour, particularly in the unorganised sector," said officials from the ministry.