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Budget needs to support incomes for consumption push
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SME Times News Bureau | 26 Jan, 2022
Budgetary support on incomes must continue to strengthen household consumption demand, said Crisil Research.
The
National Statistical Office's latest estimates on India's gross
domestic product (GDP) for this fiscal show that household consumption
demand is lagging fiscal 2020 levels by 3 per cent.
As per Crisil
Research, the past few budgets have emphasised the government's intent
to drive potential growth by leaning on a mix of capex and reforms.
"But
with the pandemic affecting low income segments the most, near-term
measures to support incomes and private consumption are crucial to
strengthen the bridge to the medium-term growth path.
"Delaying a
sharp fiscal correction to make room for boosting employment and
infrastructure spending is probably the best bet at this juncture," it
said.
Besides, it said Centre can create an additional fiscal
space of Rs 35 lakh crore over fiscals 2022-2026, by postponing the
fiscal deficit milestone of 3 per cent.
"Moreover, though nominal
GDP growth is estimated to decline from 17.6 per cent in fiscal 2022 to
12-13 per cent in fiscal 2023, it remains strong. A broad-based
recovery and improved compliance should also benefit tax collections.
"This,
together with a gradual path of deficit reduction, can provide room to
accommodate spending on supporting rural and urban employment generation
- near-term consumption-supporting measures as outlined below -- and to
fund capex over the next four fiscals."
It pointed out that
policy support focus on incomes must continue for longer, till growth
becomes broad-based and demand conditions show sustained improvement.
"The
MGNREGS remains the only lifeline for the vast section of landless,
informal sector and migrant workers, who have borne the brunt of
repeated pandemic waves and lack of employment opportunities in urban
areas. A higher allocation for the MGNREGS must be prioritised this
fiscal.
"There is also merit in introducing similar employment
generation schemes in urban areas, given how swathes of workers such as
in urban construction and contact-based services remain
un/underemployed, even if lockdowns have become less restrictive. The
case for a national urban employment guarantee scheme has repeatedly
been put forth by experts as well as the Parliamentary Standing
Committee on Labour in its August 2021 report. The time is ripe for its
realisation."
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