Macro Economics Assignment

Medium term:
Investment : A stimulus of nearly ` 1 lakh crore (0.5 per cent of GDP) has been provided by way
of lowering of Corporation Tax rates ensuring that sufficient surpluses are available for private
investment. The Govt. tried to maintain a balance in the estimates for 2020-21 by providing
adequate resources for meeting revenue expenditure and boosting Capex, while keeping the
fiscal deficit at 3.8 per cent and 3.5 per cent for the years 2019-20 and 2020-21 respectively
Manufacturing: Further, customs duty was reduced on certain goods to reduce input costs
and/or to remove duty inversion, so as to incentivize the domestic value addition in these sectors.
To incentivize exports, the export duty on EI leather has been abolished.
Fiscal Indicators: To generate demand and stimulate growth, the Government is incurring
massive capital expenditure to fund large-scale projects. In the medium term, the ratio of revenue
deficit to fiscal deficit is expected to improve to 67.7 per cent in 2021-22 and 61.6 per cent in
2022-23 on account of higher growth pace of Capex compared to revenue expenditure in the
medium term.
Long term:
Real estate: The Budget 2020 was expected to give a boost to the ailing housing sector by
providing more liquidity for the sector, onetime restructuring of loans, and tax deductions on
home loans to give impetus to buyer sentiment. However, the budget failed to deliver on these
lines but could only declare a tax holiday for one more year for to affordable housing developers
and loan sanctioning. This move is expected to boost the realty developers to launch more
affordable housing projects which lead majority of the demand of the housing segment since last
18 months. For first time home buyers, the limit to avail additional Rs 1,50,000 interest
deduction on home loans has been extended to 31st March, 2021. Since a lot of home buyers fall
in the lower and middle-income segment, this tax benefit is expected to boost demand
significantly. Experts have said that the budget fails to address the short-term requirements of
this sector.