Time to Focus on Resolving Demand-side Issues: India ratings on budget 2022
New Delhi: According to India Ratings and Research, the budget must redirect the government focus in resolving demand-side issues by moving away from fixing supply-side problems which have been the focus since March when the pandemic began to pummel the economy.
“It is high time to change gears and focus on the demand side as well, lest the ongoing recovery begins to lose steam. There is nothing wrong with addressing the supply-side issues, as it was necessary to restore/augment the broken supply chains. But, lack of adequate demand may jeopardize the recovery and may even lead to a second-round impact,” Sunil Kumar Sinha of India Ratings warned in a note on Friday.
It is to be noted that since 2012, consumer demand has been one of the biggest missing links in an economy that was nearly overheated after the heavy stimulus doses following the 2008 global financial crisis.
Extend more support to real estate, especially the affordable housing segment; since micro small, and medium enterprises still face headwinds in securing finance, they need to get continued government support to remain afloat in FY22.
Another key area is to re-prioritize both revenue and capital expenditure towards essentials, giving priority to mass vaccination/public health. Similarly, the budget must rationalize/discontinue schemes/sub-schemes that have meager resource allocation.