Union Budget 2020: Challenges before Modi government to bring declining economy back on track
New Delhi | Jagran Business Desk: The 2020 budget has become very challenging for the Narendra Modi government in view of the declining GDP growth rate, rising unemployment, rising inflation, poor investment sentiment and falling consumer confidence. Both engines of economic growth - consumption and investment are going through the worst phase and sectors such as auto, real estate, manufacturing, construction, agriculture and exports that have a large number of jobs are under constant pressure.
Some experts are considering the upcoming budget a crucial chance for the government to get the economy back on track. Till now the measures taken by the government have not resulted in the desired results.
Here are some economic challenges before the government.
The GDP growth rate has been steadily declining for the last seven quarters. During the third quarter of the current financial year 2019-20, the GDP growth rate increased by only 4.5 per cent compared to the same quarter last year. Till about a year ago, India was at the top of large developing economies in terms of GDP growth. But now we have fallen behind many countries in this matter.
China is ahead of us with 6 per cent growth. Countries like the Philippines, Indonesia and Vietnam have also gone ahead of India. Vietnam's growth reached 7.3 per cent. In such a situation, accelerating the growth of the economy is the biggest challenge for the government at this time. The roadmap to tackle this challenge can be seen in the Budget to be presented on February 1.
Earlier, the government took several measures to bring the economy back on track. Along with a major reduction in corporate tax, the RBI has cut interest rates several times. But these measures also did not show any significant effect on growth. The government hoped that the reduction in corporate tax would improve investor’s sentiment, which would increase business activity.
Similarly, liquidity was expected in the market due to a reduction in interest rate, but it did not have a significant impact on credit growth. The non-banking finance sector, which used to give more than 50 per cent of small loans, is under pressure. Consumer confidence is also at the lowest level since 2014, which is critical for business activity and growth. The unemployment rate is at a 45-year high with 6.1 per cent.
In the recent past, rural demand has decreased more than in cities. This can be understood from the sharp decline in consumption growth of the first half of this financial year. At present, the exemption limit is Rs 2.5 lakh, although income up to five lakh can be fully deducted. That's why experts believe that by increasing the exemption limit, more money will go into the hands of consumers and this will encourage consumption.
However, amid the possible reduction of tax collection by around Rs 1.45 lakh crore from corporate tax cuts and the fall in GST collection, it is a big challenge for the government to meet the expectations of big income tax exemption. A major challenge before the government regarding the 2020 budget is to increase the confidence of the common people from business and industry.
Posted By: Talib Khan