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Turning to the Budget



Focus must be on incentivising savings via tax route



Madan Sabnavis


An immediate market 
      response to the election 
      result can be gauged by 
how three indicators have moved  
The Nifty ended at 23 263 on 
Monday and moved to 21 884 
when the market closed on 
Tuesday  The 10-year bondyield 
which was at 6 95 per cent ended 
at 7 05 per cent while the rupee    SAVINGS  Must get a boost
ended lower around T83 53   
from 183 14   on Monday  Clearly 
the markets have been surprised     indicated that it would like people 
with the exit polls not quite       to move to the new tax module 
working out  However  this can be   where rates are lower but 
considered to be transient and the  concessions not available  
markets should revert to normal     expanding on the tax concessions 
once the government is formed       on savings would be pertinent in 
  It can be argued that             the current situation 
irrespective of the victory margin    On the expenditure side the 
and the government that comes to    immediate need will be to look at 
power  there are certain areas      ways of spurring investment in 
which need to be addressed on the   the private sector  Here it can be 
economic front  The two big         expected that there would be 
policies coming up in the first two some outlays for a PLI like scheme 
months would be the credit policy   for the MSMEs  This will help to 
and the Budget  The credit policy   not just increase investment but 
is more in the realm of the         also create job opportunities in 
Monetary Policy Committee           this segment and make the sector 
which is independent and would      more competitive such that it 
deliberate and decide on the        becomes apart of the longer term 
policy rate and any other related   aspiration of becoming a part of 
issues on June 7  Therefore  the    global value chains 
repo rate and stance are outside      Outside the Budget the 
the result of the elections         government will probably look 
                                    more attentively at exports  This 
SAVINGS AND CONSUMPTION             has been an Achilles heel for us  
The Budget would  however  be       Notwithstanding the creation of 
the first immediate policy to be    SEZs and various incentives 
implemented bythe government        provided through duty drawbacks 
It can be assumed that the          and cash incentives  exports of 
Finance Ministry has already the    goods have been more demand 
blueprint of what needs to be       driven and hence volatile  Here 
done and hence it would be more     there is a strong case for drawing 
of a review of the numbers as well  up a medium term strategy for the 
as any new thought on the content   next three years where export of 
which would be included  In fact    goods are able to attain a stable 
with the knowledge of both the      rate of growth much like what can 
fiscal performance in FY24 and      be seen in case of exports of 
the provisional figures of GDP for  services  The way out is to sign 
FY24  the numbers for FY25 can      more FTAs with countries so that 
be relooked and revised             there is fostering of both trade 
  Are there any specifics that      and investment flows 
would need to be covered in the       Besides these areas of growth  
Budget  On the taxation front       the Centre will have to draw up 
there will be a need to look at how plans with the States to ensure 
best to manage the right mix of     that the right direction can be 
consumption and savings which       given to both health and 
have been pain points in the last   education  which is essential to 
few years  Savings need to be       ensure that there is a viable future 
increased to ensure that the        for the youth  As these are 
current account deficit is under    concurrent subjects  the initiative 
control and that domestic funds     has to come from both the 
can be used for furthering          governments 
r investment  Here a call has to be   The fact that the economy is 
taken on whether there should be    well-positioned for a take-off is a 
any incentives provided on          big plus for the government  
savings through the tax route  Any  These issues can be taken up 
benefits on say interest or         immediately to leverage this 
principal paid on home loans can    situation 
boost not just savings but also 
help to accelerate investment       The writer is Chief Economist  Bank of Baroda  
While the government has            Views are personal
Record : 1 / 1
