Budget 2019: Fiscal Expansion Could Help Solve India’s Agrarian Crisis, Says Ficci’s Somany

The government can afford to breach the fiscal deficit target by 0.1-0.2 percent to access additional funds to address the country’s serious agricultural crisis, according to Sandeep Somany, president at Federation of Indian Chambers of Commerce and Industry.

The agrarian crisis is “quite serious” and we need to put in the additional resources to make sure that the farmers are well supported, Somany told BloombergQuint in an interview.

The government has been divesting Rs 80,000-90,000 crore from central public sector undertakings in the last few years to get additional funds but that is not enough, he said. “I believe this target has to be significantly raised upward to well in excess of Rs 1.5 lakh crore for the year.”

In addition to the sale of shares, Somany said the government needs to have a much more comprehensive policy in terms of disposal of excess land with PSUs, idle assets, factories, and loss-making units, which would enable the government to have easy access to these additional resources to fund the gap.

Economic Priorities In The Budget

• The previous quarter’s GDP was 5.8 percent, the lowest in the last five years.
• This is a matter of concern because until there is growth, generating employment and investment are two problems that cannot be addressed.
• Both are urgently required to be triggered and that is what the budget must focus on.

On Corporate Tax Rate

• If the government delivers a flat 25 percent corporate taxation rate, we will all be happy.
• The pragmatic solution links reduction of corporate tax to generation of additional employment.
• When you generate employment, you will be investing.

How To Revive Corporate Investments?

• With muted growth, investments become a problem because the growth itself is falling.
• Indian industry is working on a 75-76 percent capacity utilisation and there is enough scope to tweak more production and serve customers.
• They will start investing only when they see robust demand growth.
• Demand growth has to be stimulated by the government than investment.

Watch the full conversation here: