The Reserve Bank of India (RBI), the International Monetary Fund (IMF), the Asian Development Bank (ADB), Moody’s and many others have slashed India’s GDP growth rate forecast, indicating their pessimism at the sluggishness gripping the economy. Renowned economists recommend renunciation of fiscal prudence to buoy consumer confidence, though a lot has been done already. What more can the Finance Minister do to lift the $3-trillion economy through a small lever called ‘the Budget’?
Coming to power in 2014, the NDA claimed to have embarked on the path of detoxifying the economy. GDP grew faster initially, but growth deceleration began from Q3 of 2018. Since then, gloom has prevailed and doom has been predicted. The year 2019 saw unprecedented efforts by the Centre to revive the economy.
Corporate tax was lowered to an unprecedented 22 per cent; repo rate was reduced to a whopping 135 basis points; GST rates were cut substantially; tax benefits were extended to individuals; and the government made enormous an effort through spending. Government spending is estimated to grow around 10.5 per cent by the end of FY2020. No other component of GDP is growing by this proportion.
People expect further tax cuts to be announced in the Budget. Actually, there has been no Budget where the public did not desire tax relief. So, should the Finance Minister oblige and reduce taxes further? This does not seem advisable.