By Elton Gomes
In 2019, all eyes will be on the NDA government’s interim budget, which will be announced in February. The budget will be the sixth consecutive one to be announced by Finance Minister Arun Jaitley, and will be crucial coming just before the the Lok Sabha elections. The new year could also see India maintaining steady growth numbers, but it will have to contain its issue of increasing non-performance assets (NPA).
Something to look forward to in 2019 is the interim budget that will be announced on February 1 by Finance Minister Arun Jaitley. Reports from December 2018 stated that the BJP-led NDA government had begun the making of the Union budget, the last one before the general elections.
The government is likely to announce a number of measures to appease rural voters and the urban middle class. The government would like to build on its rural vote base, while retaining its traditional support base in cities.
Jaitley is likely to include some tax measures in his upcoming budget speech. While most interim budgets usually keep tax rates unchanged, there have been instances of tax proposals being presented in transition budgets.
Since all indirect taxes have been subsumed under the Goods and Services Tax (GST), only the GST Council can introduce any change in tax rates. This means that Jaitley might announce some changes related to custom duties and direct taxes. Bt
Will India’s banking sector overcome its NPA issue?
The Indian banking sector has been in the news for several months over its NPA crisis.
NPAs have accumulated due to several bad judgment calls made in the past. Lending operations in the banking system are connected to the expectations of how the economy will behave. If the economy is growing at a fast pace, it is assumed that the same will prevail in future.
The corpus of bad loans has been increasing and is proving to be a roadblock to economic growth. It is acting as a constraint on fresh loans not for the large corporates but also for the crucial small and medium sector which forms the economy’s backbone.
In his article for Mint, Rajrishi Singhal suggests that a corporate bond market could be an ideal solution for freeing banks and businesses from this eternal cycle of bad loans and NPAs. However, there are no easy solutions for NPAs, and they could affect the Indian economy till April 2019.
India’s economy in 2019
India’s economic growth will marginally slow down but remain at around 7.50% in 2019 and 2020, the Organisation for Economic Cooperation and Development (OECD) said in November. OECD predicts India’s GDP at market prices to grow 7.3% in 2019 and 7.4% in 2020 from 7.5% in 2018.
“Economic growth will slow somewhat but remain robust, at close to 7.5% in 2019 and 2020,” the Paris-based organisation said in its 2018 Economic Outlook for India.
The Reserve Bank of India expects FY19 growth at 7.4%. Global credit rating agency Moody’s Investors Service has predicted that India could grow at a rate of 7.3% in 2019 and 2020.
Finance Minister Arun Jaitley, in July 2018, said that India would be the fifth largest economy of the world by next year. His comments came after a World Bank report, which said that India had become the sixth largest economy of the world pushing France to seventh position.
“If we keep growing at the rate which is being projected, it is likely that next year we will be the fifth largest economy ahead of Great Britain,” Jaitley said, “Being the fastest growing economy for the last four years, we can look at the next decade as one of economic expansion.”
“We have started witnessing many of the advantages of a fast-growing economy. More consumption, more production, more industries, expanding service sector, greater urbanisation, many more jobs, more economic activity and certainly more revenue,” Jaitley wrote in his blog, elaborating on the revival of India’s economy from a slowdown in 2016-17.
Elton Gomes is a staff writer at Qrius