Budget 2020: Government May Increase Spending To Reduce Income Tax To Bring The Economy Back On Track

New Delhi, Reuters. Prime Minister Narendra Modi’s government can give some relief on the personal income tax front in the budget of 2020-21. Also, the government is also expected to increase spending in the infrastructure sector. According to government sources and economists, the government can take these decisions to increase consumer demand and investment. The Indian economy is facing its worst phase of a decade. Economic growth in the July-September quarter reduced GDP growth to 4.5 percent. This has affected the job prospects of crores of youth.

The government has cut corporate tax. On the other hand, the RBI also cut the repo rate significantly. Despite this, investment in the country has not got the required momentum. Economists and investors say that increased spending on road, rail and village improvement schemes, along with steps to encourage consumption in the upcoming budget, will help bring economic growth back on track. Finance Minister Nirmala Sitharaman will present the Union Budget for the financial year 2020-21 on February 1. 

Economist Shilan Shah at Capital Economics in Singapore said that the prospects of a stimulus move increased due to the weak economy and anti-government protests. He has said in a note that these measures will give a slight boost to the growth in the coming quarters. 

Recently the International Monetary Fund (IMF) lowered the estimate of India’s economic growth to 4.8 percent in the current financial year. With this, the GDP growth estimate for the next financial year was also reduced to 5.8 percent.  

Government sources told Reuters that under current circumstances, Finance Minister Nirmala Sitharaman could postpone the earlier target of reducing the fiscal deficit target to three percent for at least two years.  

Experts say that domestic investors can expect relief on the income tax rate front after the corporate tax cuts in September last year.