On 31st December 2019, Union Finance Minister Nirmala Sitharaman launched a massive push for infrastructure development with the commitment to invest Rs.100 Lakh Crore in different infrastructure projects in the ratio of 39:39:22, where 39% each will be invested by Central and State Governments while 22% will be invested by private parties.
Since Budget 2020 was just two months away, this huge announcement, though welcome step, made me ask one thing; of late, has budget been reduced to glorified annual event or does it still hold some relevance. Not just this singular event but at regular interval, Finance Minister herself leads from the front and interacts with media about policy and strategy interventions.
I asked Mr. Suraj Sharma, CEO, Punarvasu Financial Services Pvt. Ltd. about his expectations from upcoming budget, open discussion about regular policy and strategy interventions by Finance Ministry and prospect of India becoming a $5 Trillion economy by 2025.
Suraj Sharma: In my opinion, during second term of NDA government, annual budget looks like becoming more a celebratory affair of long practiced routine. Government, by intervening from time to time and interacting with the country through media has made annual budget more for middle class customers to see what is in store for them, like tax breaks and cost of household and daily use items going up or down. But I must say, it is doing the right thing. It helps in making two things very clear that government is ready to listen and it is always willing to take corrective steps.
Finance Minister’s announcement of Rs.100 Lakh Crore National Infrastructure Pipeline for next five years is a welcome step towards ushering country to $5 Trillion economy. Even if government misses the timeline by a year or two but $5 Trillion economy is not an unachievable dream.
I would be keen to see from where this money to fund these projects will be generated and where are the private partners to work on these projects. I am saying so because almost all the companies working in big government infrastructure projects are already heavily debt laden.
Mukul Bhartiya: I was listening to Ms. Geeta Gopinath, Chief Economist, IMF at Indian Economic Conclave 2019. She was worried that India’s private consumption is down, investment has slowed down and whatever growth we are seeing in last couple of quarters is due to the government’s spending. Core inflation is at 3.5%, which along with weak import is also a sign of weak private demand. That’s why, IMF will revise India’s GDP growth forecast drastically negative in their report to published third week of January 2020.
Suraj Sharma: I have a little different opinion than experts on the topic of sluggish growth in private consumption. Indians by and large were never of extravagant nature. So, I have my doubts firmly placed about decline in core consumption items.
Let’s talk about the most talked about item in the slowdown discussion; cars. If auto industry is facing the challenge of slowdown, then how come KIA and MG Motors are ramping up the production? Indian companies needs to be little bit more accepting towards their inefficiencies and the point that every time they can’t run to government to bail them out. Why should government, at public’s expenses, bail out the corporates for their inefficiency. Let me give you one example without naming the company. The amount of time a leading steel manufacture of India takes in producing a quantity of steel, china takes less than one third of that time and it is reflecting in the total steel production of both the countries as well.
Indian consumers are willing to pay but for the quality. Old companies can’t rely on old ways to win new customers. They will have to deliver the quality. They can’t keep cribbing about slowdown in demand.
What I am more bothered about is the infrastructural capacity to handle frictions in life journey of the business and their tracking mechanism.
Let’s take two example; NPA of one liquor to aviation conglomerate and another one is cut in corporate tax. Despite the first case hanging in air for so long, we are not aware when will this case be done and dusted. This is not single case to bother about; there are many. So, these cases need to be resolved and closed on priority.
The next example I mentioned is of corporate rate tax cut. When you cut the tax, there are obvious two outcomes: i) Growth in the business ii) De-growth in tax collection. Tax cut only make sense when tax collection due to growth in business and subsequent tax collection offset the de-growth in tax collection due to tax cut. But this data is not available. Government must have the capacity to measure every metric it sets out to take economy towards growth and $ 5 Trillion GDP by 2024.
You can also read Mr. Suraj Sharma about his slowdown on Indian Economy Is Indian Economy Under Slowdown or Crisis