Union Budget: Test of Mettle as India’s Economic Growth needs to Recuperate

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July 5 is when the re-elected Modi Government will present its first Budget with an aim to address India’s economic growth which has hit a 5-year low of 6.8per cent. India’s first full-time women Finance Minister, Nirmala Sitharaman, who handled the Defence portfolio in the previous Government is set to present the highly-anticipated budget. It will be followed by an interim budget in February 2020.
Sources hint at the Finance Ministry evaluating capital needs of state-owned banks, and that it is likely to provide about Rs 30,000 crore in the upcoming Budget to help them meet the minimum regulatory capital requirement in the current fiscal. In addition, the public sector banks would also require capital for credit growth, which has just started picking up. Five weak banks under the Prompt Corrective Action (PCA) framework of the RBI too, need capital to maintain minimum regulatory capital ratios as per the Basel III norms.
The Government took a similar step in the last fiscal when it made record capital infusion of Rs 1,06,000 crore in the public sector banks. As a result of capital infusion, five banks – Bank of India, Oriental Bank of Commerce, Bank of Maharashtra, Allahabad Bank and Corporation Bank – came out of PCA. Out of 11, only five are left under the weak bank category of the Reserve Bank of India and the Government will be looking out for ways to bail them out.
Ahead of the preparation of the full-year Budget, government officials have started consultations with industry bodies such as the FICCI (Federation of Indian Chambers of Commerce & Industry) and CII. “The upcoming Budget is an opportunity for the government to boost consumption and investments through appropriate fiscal stimulus and policies”, FICCI said.

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