Indian investors are
expecting the upcoming Union Budget to be focused on boosting rural
consumption and demand as wider relief to taxpayers is unlikely given
government's restricted fiscal space.
Brokerages predict that the
government may not be able to announce any deduction in personal income
tax, but its focus on social sector programmes such as Mahatma Gandhi
National Rural Employment Guarantee Act (MGNREGA), National Rural
Livelihood Mission (NRLM), among others, is likely.
"In line with
the past budgets, social sector measures are likely to gain traction,
as previously signalled by a sustained push towards electrification of
villages, sharpening MGNREGA focus, improved quality and quantity of
healthcare availability, education, skill training, creating vocational
institutes etc," a Centrum report said.
Rural spending by the
Central government grew 20.8 per cent year-on-year in the first seven
months of FY20, marking the highest growth in the past 11 years.
Besides, the share of rural spending in the centre's total spending rose
sharply from 11.3 per cent in FY19 to the 8-year high of 13.3 per cent
However, fiscal deficit remains at elevated levels which
is worrying for the investors as it curtails the government's ability
to spend. Fiscal deficit till November 2019 accumulated to Rs 8.1
trillion, up 12.7 per cent from November FY19.
Several experts have said the government is set to miss the fiscal deficit target of 3.3 per cent.
faltering consumption impulses had been weighing on the growth since
the onset of this fiscal year. However, the slowdown became pronounced
in Q2FY20, thereby coercing the government authorities to intervene by
announcing the corporate tax rate cut, Centrum said.