Finance minister Nirmala Sitharaman presented her second full-year annual budget in the Parliament on February 1, 2020. As expected, the FM announced a slew of measures to spur the fiscal health of the economy, which has been the slowest in a decade.
The Budget has given a balanced approach to agriculture and rural economy as well as infrastructure, industry and commerce. New fund allocation for farm, irrigation and rural development are likely to achieve the government’s existing plan of doubling farmers’ income by 2022.
Measures like additional spending on infrastructure, transportation, education, MSME and healthcare are likely to spur consumer demand and investment.
New spending in these areas is likely to generate employment as well. Simplification of the tax regime and tax relief to the middle class and the lower-middle-class segment may also improve the public sentiment.
Earlier, the corporate tax cut and monetary easing measures are taken by RBI failed to attract investment and boost the economy.
Anyhow, many of the schemes announced in the Budget are expected to be the pillars of the government’s dream of $5 trillion economy by 2025.
At the same time, the Budget gives nothing to cheer to the gold industry. The most expected import duty cut of gold was not considered by the FM.
Indian gem and jewellery sector is one the largest in the world contributing about 29 percent of global jewellery consumption. However, faltering demand for gold due to the overall slowness in the economy and elevated prices had an adverse effect on the gold industry.
A surge in duties and taxes also shelved the retail investors. In the last budget, gold’s import duty was hiked to 12.5 percent from 10 percent with a view to curb the widening Current Account Deficit.
Meanwhile, high taxes and duties compared to other international markets attract smugglers and illegal export to the country. There is also a threat of the grey market-making trouble for organised market players in the country.