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Budget 2021 expectations | Reducing cyclicality of rural household income may get priority

Taxing cigarettes comes as an easy alternative to garner additional revenues. Grant of infrastructure status for hotels, restaurants would lower the cost of funds.

January 28, 2021 / 02:35 PM IST
Representative Image (Source: Reuters)

Representative Image (Source: Reuters)

The central government is dealing with mounting expectations of strong reforms to stimulate growth amid a painful COVID crisis.  In recent years, the spending patterns have taken a hit due to implementation of demonetisation and introduction of GST. The COVID crisis has further disturbed the purchasing power as well as behaviour of consumers. Revival of consumption cycle remains a key priority in Budget 2021 to boost domestic growth as it forms the core of India’s GDP. Moreover, history suggests that the economy displayed robustness during the financial crisis of 2008 due to resilience in core consumption.

Core focus to be rural

2020 was, fortunately, a good year in terms of monsoon. Rural has been a mainstay of the entire FMCG basket and have led the recovery in demand following a bumper crop season last year. With majority of farmers still heavily dependent on the monsoon for their incomes, we expect an increase in allocation for agriculture and allied sectors (fertilisers, irrigation, etc.) so that dependence on rains is lowered and the cyclicality of incomes among rural households can be reduced.

Given that the pandemic has caused significant business and livelihood disruptions, the government can use the budget to announce its further intent and follow up land and labour reforms with additional policies to bring some flexibility in hiring constraints and initiate further schemes like MNREGA to encourage job creation.  The focus would be to reverse the labour migration caused by the pandemic and encourage employment for low-skilled workers within labour-intensive industries such as - textiles, housing, MSME, etc.  Besides, the government could also dole out some additional packages to offer direct incentives to the rural consumers.