Brickwork Ratings on Thursday said the Union Budget 2020 is an opportunity to unleash reforms to restore economic growth and to set a clear roadmap for achieving the ambitious USD 5 trillion economy target by 2025.
"BWR expects Union Budget to provide a boost to investments and savings in the Union Budget 2020-21, to be presented on February 1, 2020, is expected to announce appropriate measures to restore economic growth and to set a clear roadmap for achieving the ambitious USD 5 trillion economy by 2025", it said.
Amidst the current slowdown in the economy evident from the 11-year low GDP estimates of 5 per cent, the approach to the economic policy for the next year needs to be genuine and realistic. The challenges faced by the economy, particularly on the demand side envisages more measures but shortfall in revenue so far, (than the targeted budget estimates) comes as a big hindrance.
Out of certain measures announced recently to revive the economy, the sharp reduction in corporate tax makes India one amongst the low corporate tax rate countries. The reduction in tax rate and lower economic growth impacted government's tax revenue, Brickwork Ratings stated.
Lower revenue generation restricts room for huge stimulus, whereas the economy can do with a booster shot. It looks like the government will adhere to fiscal consolidation path as it has already curtailed expenditure for the fourth quarter of 2019-20.
The Prime Minister's Office (PMO) has also cautioned the Ministry to not to set over-ambitious tax and fiscal deficit targets. Hence the task of the Finance Minister has become more challenging, and she has to be very careful while making the budget allocations to the existing schemes as well, it noted.
Most of the industry specific demands have been addressed by the Finance Minister in her announcements since August 2019, like recapitalization of banks and measures to address NBFCs liquidity crisis, auto sector-related proposals and reduction in corporate tax rates, it observed.
These measures are expected to have an impact gradually. The amendments made in IBC law enabling the resolution of finance companies and the Supreme Court verdict on the resolution of Essar Steel case has been positive in terms of releasing the locked-up funds in stressed assets. The government is expected to continue amendments to various laws to provide ease of doing business. Much of the focus is on what the Budget 2020-21 offers to bring the economy on a growth track quickly to attain the USD 5 trillion economy goal by 2025, it said.