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Budget Will Push Domestic Demand: Yashwant Sinha

Tuesday, March 03, 2015
By A Business Reporter

The Budget, by giving push to infrastructure spending, would lift domestic demand through the virtuous cycle”, said Yashwant Sinha, Former Union Minister for Finance and External Affairs, at an interactive meeting jointly organized by MVIRDC World Trade Centre and the All India Association of Industries. “The Union Budget 2015-16 is expected to create a virtuous cycle as the huge infrastructure investment proposal of the Government would spur private sector investment and consumption in the overall economy,” said Sinha.  

He explained that the recessionary trend in the Japanese, Eurozone economies and the slowdown in the Chinese economy would depress global demand. “This would in turn force Indian companies to depend on domestic demand,” he added.

Hoping that this budget would encourage savings in the economy, Sinha raised concern about the decline in the savings rate in the economy from 37% (as a proportion of GDP) a few years ago to less than 30% at present.   “The increase in savings would consequently lead to a rise in investment rate to 39% and lead to overall economic growth rate between 9-10%. The philosophy behind the present government policy is to ensure that public spending leads to creation of productive assets rather than putting money in the hands of the people, which would create inflation,” he said.  

Sinha expects the fall in WPI and CPI to prompt RBI to reduce interest rate by 50 basis point units in its next monetary policy review. He also raised concerns about the huge delay in implementation of Projects on account of hassles such as land acquisition and environmental clearances. While various measures were announced to give a major thrust to boost funding to the infrastructure sector,Sinha felt that the government’s plug and play concept would address these hassles in the days ahead.

However Sinha expressed disappointments on some aspects of the budget such as  the multiplier effect of investments in the realty sector, he said that the rise in the tax exemption limit for interest rate on housing loan should have been raised up to Rs. 250,000 lakh as against the budget proposal of up to Rs 200,000 lakh.  

He also expressed disappointment over the government’s inability to stick to the fiscal deficit target of 3.6% set out by the 14th Finance Commission for 2015-16 ( the budget estimate of fiscal deficit for 2015-16 is 3.9%).

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