Despite acknowledging that inflation surged above tolerance level and the economy continued to be weak, the central bank’s MPC sees policy space available for future rate action.
At the last monetary policy meeting of FY20, the central bank kept the interest rate unchanged, with a warning to not read the ‘pause’ continually for its future actions.
Following Saturday’s 987.96-point fall, the S&P BSE Sensex closing at 39,872.31, just 136.78 points higher, on Monday shows that the markets are still unhappy with the Budget.
If the country wants to grow at a faster pace, then the government must deliver on reforms quickly as it is the only way to enable an economic recovery, says the Economic Survey.
At a time when the economy is precariously placed amid multiple challenges, Budget 2020 could mark the government’s decision to prioritise fiscal consolidation over growth.
Despite a lower tax mop-up and the shortfall in disinvestment target, government receipts are seen growing 6% in FY20, thanks to RBI’s large dividend. But FY21 would be different.
The government needs to focus on two fronts: providing a stable policy regime for better private sector participation; and ensuring the policies draw global companies and nurture domestic companies.
John Garvey, global financial services leader at PwC, says he is also concerned about non-performing loan ratios of banks and the credit crunch in India’s economy.
