Budget has created growth platform for coming years also, say experts

Our Bureau Chennai | Updated on February 07, 2021

From improving the transparency of the Budget to increasing allocation for capex to setting aside fiscal consolidation plans to spur economic growth, the Budget 2021 has not just created a platform for growth in FY 2021-22 but even beyond, says young economists from credit rating agencies and next-gen leaders of leading industrial houses.

“The focus of the Budget is not just short-term but also medium-term in nature. There was a hope that something would be done for the medium-term and I think they (government) have surprised positively by announcing that,” said Dipti Deshpande, Senior Economist at CRISIL.

She was speaking at a virtual panel discussion, ‘Budget 2021 - Resetting the Indian Mindset’ organised by the Chennai International Centre on Saturday. The discussion was moderated by V Anantha Nageswaran, Part-time Member, EAC-PM, Government of India.

“There is a conscious choice to tilt towards capital expenditure despite walking on a tight fiscal rope and that provides optimism and creates a platform for growth beyond FY22,” Deshpande said.

However, she also added that since it is an investment-led push and not a consumption-led push to growth, the full impact will be seen over time and not just in FY22. “Transparency in the Budget has improved, which will not just appeal to the Indian investors but also to foreign investors, who are now actively investing in India.”

Auto, textiles sectors

Speaking on the industry side, Harish Lakshman, Vice-Chairman of the auto component house Rane Group, said even before the pandemic struck, the automotive sector had a very bad phase with industry witnessing a significant de-growth in FY 2019-20.

He added that while the auto sector was disappointed for not getting any stimulus under the government’s Aatma Nirbhar package announcements, the industry is today happy and smiling because of a sharp recovery. He hoped that the momentum would sustain.

“The production-linked incentive (PLI) scheme, announced even before the Budget, is a good step in the right direction. We are very happy that the auto sector is getting the maximum allocation amongst various sectors under the scheme,” Lakshman said, adding, “This is the right time for our industry to capitalise on that sentiment and utilise the scheme to take us to the next orbit.”

Responding to Nageswaran, the Rane Group Vice Chairman also acknowledged that, in hindsight, the government was right in not buckling up to the auto industry’s demand for GST rate reduction at a time when the demand had not picked up.

Hari Thiagarajan, Executive Director, Thiagarajar Mills said, the Budget has put the right kind of thrust in three economic growth engines such as private investment, consumption and exports.

On the textile industry announcements, Thiagarajan said, “The Budget has announced setting up of seven mega textile parks, out of which 2-3 might come to Tamil Nadu. While the announcement is good, the issue is that there are already textile parks in the country which need attention and care.”

“One dampener for the textile industry is the 10 per cent import duty levy on imported cotton,” Thiagarajan said, adding, “There is huge and market for fabrics and garment made out of cotton which are grown in the US and Egypt so the 10 per cent import duty is going to affect some of the spinning mills which import cottons.”

Positive aspects

Arjun G Nagarajan, Chief Economist at Sundaram Asset Management said that government's restrain during the Covid phase and spending during reconstruction phase, transparency in budgetary allocations and focus on growth over ratings are some of the positive takeaways from the Budget.

“The Budget, sort of, echoes a certain commentary in the Economic Survey. On the rating front, we have not been fairly rated, so let’s not really be too concerned about rating and the priority is growth and let's push the accelerator on growth and that will take care of everything else and that has been the overarching theme of the entire budget,” Nagarajan said.

Published on February 07, 2021

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