ECONOMISTS PRAISE FISCAL DISCIPLINE IN BUDGET 2024 DESPITE ELECTION YEAR CHALLENGES
The Union Budget 2024 has been a focal point of analysis and discussion, as economic strategies and fiscal policies dictate the trajectory of nations. In the India Today-Business Today Budget Round Table 2024 economists meticulously dissected the budget to understand its implications on various sectors of the economy.
“From a fiscal point of view, the recent budget ticked all the boxes we were looking for. The expectations we had in terms of what the fiscal map would look like were met very closely. We knew there was going to be a revenue upside. The sense was that it would be fair to spend half of it and put at least half towards fiscal consolidation. The fiscal deficit is now better at 4.9% of GDP, which is at the lower end of the range we had expected, making us quite pleased with the outcome,” explained Dr. Surjit Bhalla, former Executive Director at the International Monetary Fund (IMF).
Abheek Barua, Chief Economist at HDFC Bank, shared his insights on the broader economic implications. “While private sector investments are expected to come in, there are issues and challenges that need to be addressed. For instance, India's relation to China's supply chains is critical, and security concerns play a significant role. Additionally, there is a serious skills problem, as big construction companies often face a shortage of skilled workers.” He pointed out that consumer demand remained a pressing issue, with significant portions of the economy lagging behind, leading to an uneven recovery.
Barua continued, emphasizing the necessity for comprehensive reforms beyond the budget. “Consumer demand is another issue, with large parts of the economy left behind, leading to uneven recovery. This impacts private investment and highlights the need for comprehensive reforms beyond what the budget can address alone. The Finance Ministry deserves credit for maintaining a firm focus on ground realities and striving to address these issues despite the challenges,” he added.
Aditi Nayar, Chief Economist, ICRA , provided her perspective on the budget's impact on tax rates and compliance. “Tax rates and compliance have shown positive trends, and the high dividend from RBI has provided some fiscal space. However, this is a one-time benefit and cannot be relied upon for future budgets. The interest payments to revenue receipts ratio and interest payments to GDP ratio remain high, presenting ongoing fiscal challenges,” said Nayar.
Nayar also touched upon the investment narrative, clarifying the situation. “On the investment front, while the narrative is that the private sector is not investing, the reality is more nuanced. Investments are happening in various sectors, though in a more modest and realistic manner compared to past exuberant Capex cycles. Consumption remains weak, especially in the rural sector, which has struggled over the past year. A good monsoon season could boost rural demand in the second half of the year, but this is uncertain,” she concluded, noting the cautious optimism for future economic conditions.
2024-07-27T12:52:42Z dg43tfdfdgfd