As preparations for the Budget 2020 has begun, slowing economic growth, muted consumer demand and stress in some key sectors are among the vital points likely to weigh on finance minister Nirmala Sitharaman's first full budget, according to Sharekhan. Besides, weak indirect tax revenues and the inability to substantially raise non-tax revenues may also add to woes, the brokerage said.

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In this scenario, the Budget 2020 is expected to include measures to boost consumption through either personal tax rate cuts for urban demand or announce schemes to support farm incomes, according to the brokerage.

Moreover, easing pain in MSME and housing sector and attracting private and foreign investments in the employment generating infrastructure sector are also key areas where the government could focus on, said the brokerage.

For capital markets, Sharekhan said the government may consider extending the tenure for long-term capital gains (LTCG) and key reforms in labour laws and judicial reforms to boost investor sentiment.

Here are the key areas to be in focus in the Budget 2020, according to Sharekhan:

Ease agri, rural stress

The expansion of PM Kisan Samman Yojana—direct account transfer of Rs 6,000 per annum to marginal farmers—and the Ayushmaan Bharat is expected to double public health expenditure as a percentage of GDP to 2.5 percent by 2025. This will be positive for healthcare services as well as the rural economy.

Water supply, river linking project

After the Swachh Bharat Yojana and Housing for All by 2022 schemes, the mission to provide safe drinking water to all households through a pipe network is expected to be a key priority for NDA-II. The river-linking project aimed at addressing drought and flooding issues could be part of the larger mission.

Boosting infrastructure to generate jobs

Various schemes and government projects such as Bharatmala, Skill India, Ayushmaan Bharat and MUDRA, etc, have helped create jobs. As rising employment increases the multiplier effect on GDP growth, infrastructure creation is likely to be a key thrust area.

Better credit delivery in housing sector

With reforms like RERA and GST well settled now and housing being a focus area for the government may see more measures to boost “Housing for All by 2022” mission. It is expected that the government will provide more incentives for the real estate sector as well to boost the housing finance sector.

Resolving power sector stress

Several power plants (mainly thermal) and state distributors are facing stress. It is imperative for the government to evolve a mechanism whereby the financial health of the power sector, as well as that of lenders, is addressed and hence a package/plan for this sector is expected.

Improving tax collections/plugging leakages

Goods and Services Tax (GST) collections picked up well in last two months of 2019, but need to increase. Better compliance measures, as well as efforts to kick-start GDP growth, are likely to be announced.

Deepening last-mile credit delivery

The government has given MSMEs and SMEs priority-sector lending status and Jan Dhan accounts are well-entrenched. These may be leveraged upon to boost the availability and delivery of rural/ consumer/ SME credit to last-mile consumers via banking channels. Banks, especially PSU banks are likely to be the key vehicles for the government’s credit delivery objective. The government may infuse fresh capital into state-run lenders in FY2020-21 so as to strengthen balance sheets to enable them to step-up lending.