Yesterday night, the US Fed did nothing. It kept the interest rates going at near-zero as they were before and also said that the bond buying would continue. No real expectations were hooked onto this Fed Meet as such.
For the Indian stock markets, which crashed big time yesterday, all eyes and ears are only on the Union Budget scheduled for Monday, 1st Feb. Till then its action packed, what with the GDP coming in on Friday and then the Economic Survey before the Budget.
As usual, the expectations are sky high and the FM has to walk a tightrope. Yes, economically we are precarious; the Budget to a large extent will define how the recovery will happen in the coming months. Demand has revived, yet on the ground, in homes, people remain wary, tight fisted, pessimistic and caution reins all decisions. And that’s the task of Nirmala Sitharaman – instilling a sense of hope, dispelling caution, restore consumer confidence and get people to loosen their purse strings and spend. The Budget needs to make people feel happy enough to kick start the sagging economy.
The Govt, will undoubtedly announce a bigger outlay for MNERGA and host of other similar social welfare schemes and at the same time, will give infra build a huge push as that alone creates millions of jobs, pushes all-over demand and brings in a sense of recovery. But for Govt expenditure to actually percolate into the system takes a while, what with the tendering, the biding, the award of contracts and beginning of actual work. What we need is now, urgent, asap.
Along with infra push, the FM has to increase every individuals’ purchasing power via lower taxes and prices. Maybe, just like the moratorium, tax cuts could be temporary and Govt revenue will also fall but if more money remains in the hands of the people, the collective push to the economy will surpass the loss of revenue in the long run. The FM needs to work on egging on demand from down to the top.
Really, more than more money going into welfare schemes alone, people would like to see tax cuts. Sops to revive Small and Medium enterprises should be a priority. Giving incentives to companies to get more into farm-based industries would help boost the farm sector. RBI has done its bit and now it’s the Govt’s turn to ensure that Banks once again start lending. Employment will not happen in one year but if measures are not taken now to boost new investments and project completions, it won’t happen even in 5 years.
Well, hopes are running high. Nationalism apart, people need to eat, earn and live a life. And that’s what we elect a Govt for.
PS: A ‘Covid cess’ is very much in the offing along with the many that we already pay.