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India's Pragmatic Budget: Sitharaman Aims to Revitalise Growth, Alleviate Distress

Sitharaman's budget targets growth drivers and job creation. It also introduces a flexible fiscal deficit approach to tackle India's economic challenges.

In this image there are buildings, bridges, water, architecture, cloudy sky, trees, grass, roads,...
In this image there are buildings, bridges, water, architecture, cloudy sky, trees, grass, roads, vehicles, people, boats and objects.

India's Pragmatic Budget: Sitharaman Aims to Revitalise Growth, Alleviate Distress

Finance Minister Nirmala Sitharaman is set to present a pragmatic budget, aiming to revitalise growth drivers, alleviate distress, and create a resurgent India. The government plans to enhance capital expenditure, targeting high-multiplier effect areas and fast-tracking existing infrastructure projects. With India's GDP projected to contract by 7.7% in 2020-21, the worst in four decades, these measures are crucial.

To stimulate demand, the government will speedily release all outstanding payments or tax refunds owed to service providers. For employment generation, steps will be taken to raise the cap for 30% deduction on emoluments paid to new employees and enhance allocation under the MGNREGA scheme. Additionally, public sector banks will be rejuvenated by reducing the government's stake to below 50% through the market route over the next 12 months.

To improve the quality of deficit, a 'fiscal deficit range' will be considered instead of a fixed fiscal deficit target, and off-budget liabilities will be included. Resources for capital expenditure can be raised through PSU disinvestment, strategic sales, and monetisation of government assets. Healthcare allocations will also be increased to work towards the target of at least 2.5% of GDP by 2022.

The government has announced a relaxation of fiscal consolidation for a year and will announce a realistic fiscal deficit target for FY2022. With these measures, the government aims to support livelihoods, revitalise growth drivers, and help create a resurgent India, despite the economic challenges posed by the COVID-19 pandemic.

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