The upcoming budget presents a unique opportunity for India to leapfrog in the global economy. Despite the grim economic outlook caused by the ongoing global slowdown and early signs of a resurgence of the COVID-19 pandemic, the budget can be used to push India to pole position among other global giants, provided it can project a healthy domestic picture.
On the Financial Services side, well-capitalized public sector banks with solid balance sheets will be crucial. The budget should also focus on credit growth for Micro, Small and Medium Enterprises (MSMEs) – the fastest-growing segment in the country – through measures like the expansion of the Emergency Credit Line Guarantee Scheme (ECLGS). Formally streamlining the co-lending system will ensure that tech-savvy players and banks come together to fuel economic growth. It will also aid the formulation of a standardized architecture on borrower data which financial institutions can use conscientiously for mutual benefit. A time-bound action plan for debt resolution via NARCL will help banks manage their stressed assets well, facilitating better business and credit growth.
Expanding on the successful Production-Linked Incentive (PLI) scheme to more sectors, transforming India into a manufacturing hub and providing employment opportunities that can make use of the country’s demographic dividend will also be key.
India’s commitment of Net Zero by 2070 needs ambitious investments in the renewable, EV and green hydrogen space. These investments require bank funding. Given the painful experience in the past leading to the 2008 GFC with infra projects, confidence needs to be built through tech enabled monitoring of outlays and detailed project tracking measures.
Additionally, reductions in income tax can also be considered taking into account healthy Goods and Services Tax (GST) collections and the fact that inflation has made age-old tax slabs and exemptions outdated.
