Budget 2020: Which Sectors Should It Focus on? Nilesh Shah Answers
Budget 2020: What to expect? Which sectors will be the focus? Share market expert Nilesh Shah explains.
Video Producer: Nayonika Chatterjee
Video Editor: Vishal Kumar
The Union Budget will be presented on 1 February 2020. The budget should be such that it speeds up the growth and generates employment for the youth.
What should the government do to achieve this? Share market expert Nilesh Shah explains.
What Budget 2020 Should Aim For
The Union Budget should:
- Support growth
- Revive investment
- Increase tax compliance
- Encourage financialisation of savings
Most importantly, the government should warrant a path for fiscal prudence, so that trust of foreign and domestic investors is maintained in our economy.
Factors to Support Growth
The country is expecting that with this budget the government will give a boost to consumption and investment. Here are four factors that will help in supporting growth:
- Government Spending
- Trade Balance
Which Sectors Will Be Focused on?
Real estate, construction and the NBFC sectors need the government’s support. Most of the workforce is in construction and real estate and its multiplier effect is on steel, cement, and other such industries. It is expected that some concession will be given in personal tax, so that construction activity and real estate sector get a boost.
It is also expected that there will be a concession in some provisions that have put a constraint on the real estate sector.
How Will People Earn?
The NBFC sector is facing hardship for the last couple of years. Budget 2020 is expected to give relief to NBFCs. Support for investments is also expected.
If the budget is fiscally prudent, interest rates can be lower, which will encourage investment. Government borrowing will be reasonable and hence it will lead to more investment. It's important for entrepreneurs to have money. India’s savings are not staying in the country.
In the last eight years, we have spent about $300 billion. Had it been invested in the country, Indian’s GDP would have been more than 12 percent today.
The expectation from the budget this year is that investment becomes very easy. Buying financial instruments like mutual fund units and bank deposit units should be as easy as buying gold. That's how investments can be encouraged .
How Will Investment Grow?
If the government is investing, it will also have to increase its income.
Chanakya once said that “as honey is collected by bees, similarly, the king should collect taxes.”
It has been noticed that whenever there has been a reduction in the tax rate, the tax collected has increased. This budget is expected to rationalise taxes and hence increase the tax collection by increasing compliance.
Government Should Work on Zero-Base Budgeting
While making the budget, the government should use the technique of zero-base budgeting. Sometimes old expenses get carried forward with every budget. As per zero-base budgeting, we can see everything from a new perspective. Expenses that do not give us profits can be removed and can be spent at the right place.
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