Structural reforms to make India a $5 trillion economy, says finance minister in 2019-20 budget

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Announcing the union budget 2019-20, India’s Finance Minister Nirmala Sitharaman said India needs to make structural reforms to create a $5 trillion economy in the next few years.

Presenting the first Budget of the second term of Prime Minister Narendra Modi’s government, she said the Indian economy that stood at $1.85 trillion five years back had reached $ 2.7 trillion now and had the capacity to expand $5 trillion in the next few years.

“In the current year, India’s economy will grow to become USD 3 trillion economy, sixth largest in the world,” she said during her budget speech.

“We need to invest in infrastructure, digital economy and job creation in small and medium enterprises,” she added.

In terms of Purchasing Power Parity (PPP), India has become the third largest economy in the world after the US and China, the first lady finance minister of the country declared.

Acknowledging the importance of infrastructure for making India a US$ 5 trillion economy by 2024, Finance Minister Nirmala Sitharaman on Friday announced several measures to boost the infrastructure in the country.

The budget speech emphasised on providing a massive push to all kinds of physical connectivity by taking forward programmes across various key sub-sectors such as roads, rail, inland waterways and air connectivity. These include public-private partnership for developing of railway tracks and rolling stock, 100% FDI in aviation sector, focus on metro and sub-urban railways and inland waterways to reduce the logistic costs.

“Railways will be encouraged to invest in suburban railways through special purpose vehicles (SPVs) and enhance metro rail network through PPPs,” said Finance Minister.

The FY20 divestment target has been hiked to Rs 1.05 trillion from Rs 90,000 crore. The Finance Minister also said that the government would continue with the strategic divestment of select Central Public Sector Enterprises (CPSEs). The strategic disinvestment of Air India would also be re-initiated. 

The budget also levied additional excise duty of one rupee on petrol and diesel that will in turn impact price of most consumer goods. The stock market did not react well to Ms Sitharaman’s debut budget. Significant benchmark indices were trading at day’s low after the Finance Minister concluded her Budget 2019 presentation in the Parliament.

The S&P BSE Sensex dipped 456 points, or 1.1 per cent, to 39,451, with YES Bank, ONGC, NTPC, Vedanta, and TCS leading the list of losers. The broader Nifty50 index lost 113 points to hover around 11,833 levels.

All the Nifty sectoral indices except Nifty PSU Bank were trading in the red. Nifty Metal index, down 2.7 per cent, took the deepest cuts, followed by Nifty Auto, Nifty IT, and Nifty Realty, which were all down over 1 per cent.

In the broader market, the S&P BSE MidCap index lost 70 points, or 0.47 per cent, to 14,863, while the S&P BSE SmallCap declined 123 points, or 0.8 per cent, to 14,213. Speaking to indoasiancommodities.com, Mr. Nirmal Gangwal, Managing Director, Brescon & Allied Partners said, “What is also very pertinent to note in the FM’s budget speech is that she has proposed Rs 100 lakh crore investment for infrastructure over 5 years. If this really happens, it will really galvanise all aspects of the economy. To raise funds, corporates and state-sector bodies will need to raise funds through debt securities, debentures and bonds. Not only will it augur well for the debt market, it will also boost the economy and job scenario.”

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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