In his latest for the Mint, Niranjan Rajadhyaksha writes on the challenges and considerations for India's upcoming budget. Excerpts below:
"On one side is the need to respond to the economic slowdown with a fiscal stimulus. On the other is the limited fiscal capacity to do so. It will require skill to strike a balance between the two.
India has been hit by an aggregate demand shock. Export growth is tepid, the corporate investment drought continues, and consumer spending shows signs of buckling under pressure. The economy has lost momentum for five quarters in a row. The anticipated cyclical recovery in the second half of this financial year will only be a mild one, at best."
On considerations for the Finance Ministry:
"First, market concerns about fiscal profligacy will have to be assuaged with credible commitments. The fiscal arithmetic presented last year was dodgy. The budget for 2020-21 should be more realistic. Estimates of tax collections should reflect the underlying reality that nominal growth is in single digits. This is a good time to reiterate an old theme of this column, that India needs a fiscal council on the lines of the Congressional Budget Office in the US to provide an independent parliamentary assessment of budget estimates."
Read the full article here.