Budget not cause of market crash: Government

Economic Affairs Secretary Subhash Chandra Garg. Image credit: The Indian Express

–Vishav and Manish Gupta

New Delhi, Feb 2: The government on Friday denied that the Union Budget presented a day earlier was the reason for the market crash of over 800 points while conceding there could be “some anxiety” that triggered it.

Economic Affairs Secretary Subhash Chandra Garg said it needed to be figured out as to what were the reasons for the biggest crash since November 2016.

“Yesterday there may have been some impact of Long Term Capital Gains (LTCG) Tax. It was expected. We need to figure out (reasons for Friday’s crash)… Maybe portfolio reshuffling has started, maybe some anxiety is there,” he told IANS.

“Today there was no Budget announcement,” he said, when asked if the sharp drop in stock prices was influenced by the Budget announcements especially the LTCG tax of 10 per cent on shares and upward revision of Fiscal Deficit target.

Replying to a question, he also ruled out any possibility of downgrading by rating agencies of the Indian economy in the light of burgeoning fiscal deficit.

Garg said Indian economy had clearly made a turnaround but touching double-digit growth was not on the horizon. He asserted that the economy would clock the top end of the 7-7.5 per cent growth target for the next fiscal.

“Double-digit growth in this environment of global low growth rates seem to be very, very far,” he said.

Though he said global issues would be a hurdle in India reaching 10 per cent growth rate, India was well on its growth trajectory and should aspire for double-digit growth.

“The Indian economy has turned around and is well on its growth trajectory. But we should aim for it (double-digit growth),” he said.

The slowdown in the GDP growth rate bottomed out in the first quarter of the current fiscal when the growth rate was 5.7 per cent. It increased to 6.3 per cent in the second quarter, he said.

“This clearly marks a turnaround in the growth story. The sectors which were not performing that well in the last four-five quarters have also started turning around whether it is construction, real estate, trading, manufacturing or exports.”

He was optimistic of the economy achieving the top end of the GDP growth target for next fiscal, which is between 7 and 7.5 per cent.

“My sense is it should be closer to 7.5 per cent. We will have growth steadily going up. So the first half should contribute more and the second half even more,” he said.

Garg also countered Chief Economic Advisor Arvind Subramanian’s argument that rising oil prices were a downside risk to achieving the growth target for next fiscal.

“Oil price relationship with growth is not straight forward as is being stated in the Economic Survey. There have been episodes when oil prices were high but growth was also very high. And, the other way has also been true,” he said.


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