Finance minister Nirmala Sitharaman’s budget for fiscal 2020-21 slashed income tax for lower earners and announced plans to sell a stake in the giant Life Insurance Corp, but the measures failed to excite investors who felt it lacked big ideas to boost the economy which is expanding at the slowest pace in 11 years.

This budget as one intended to “boost incomes and enhance purchasing power,” Sitharaman told Parliament at the beginning of a marathon two-and-a-half speech which she had to cut short because she felt unwell. But critics said she hadn’t delivered the stimulus the economy needed. And the benchmark S&P BSE stock market gave its own verdict _ closing nearly 2.5 per cent lower.

“This budget was seen to be an opportunity to announce big, bold reforms given the state of the economy. On that count, there is a degree of disappointment in some quarters as expectations have not been met,” said Satish Reddy, chairman of India’s second-largest drug company, Dr Reddy’s Laboratories Ltd.

The government projects economic growth this current fiscal year, which ends March, 31, 2021, at 5 per cent, its weakest level in 11 years. But even 5 per cent is seen as too rosy a forecast with International Monetary Fund predicting growth of 4.8 per cent and private investment houses seeing growth as low 4.5 per cent.

“The budget was below the par considering that market had very high expectations from the government,” said Vinod Nair, research head at India’s Geojit Financial Services. The economy suffered one body blow in 2017 when Prime Minister Narendra Modi implemented demonetisation and a second with a hastily implemented GST which hit industry, and growth has yet to recover, economists say.

Sitharaman announced that the cash-strapped government will miss its deficit goal for a third straight year. For this financial year ending in March 2020, the deficit target is now 3.8 per cent rather than the targeted 3.3. Next year’s deficit target has been revised to 3.5 per cent. (The finance minister invoked an escape clause in tax laws allowing the government to ignore a mandated goal to reduce the deficit to 3 per cent of GDP by the financial year ending March 2021).

In an effort to spur personal consumption, the government is cutting taxes for lower-level income earners. But there’s a hitch in that they must give up deductions and exemptions to take advantage of the lower rates. And no one knows yet how those calculations will work out.

Income tax payers will pay 10 per cent tax on income between Rs 5 lakh to Rs 7.5 lakh, down from a previous 20 per cent; Those earning between Rs 7.5 lakh and Rs 10 lakh will pay 15 per cent tax against an earlier 20 per cent; people earning Rs 10 lakh to Rs 12.5 lakh will pay 25 per cent, down from an earlier 30 per cent; those earning Rs 12.5 lakh to Rs 15 lakh will pay 25 per cent against an earlier 30 per cent. Income tax will remain the same for those earning above Rs 15 lakh.

Economists largely welcomed the move but Niranjan Hiranandani, president of business body Assocham, noted that the new tax regime “needs a lot of computing before we can fully understand the actual benefits.... Overall, the budget was high on intent and low on execution.”

The government says the boost to purchasing power from lowering personal tax rates will cost the exchequer Rs 40,000 crore. To encourage investment, the government is also removing the dividend distribution tax -- that’s the tax levied on dividends issued by companies.

Now, dividend income will be taxed in the hands of investors according to their individual tax rates. But this move could actually lead to some investors paying higher rates of tax, according to tax experts.

Former Congress finance minister P. Chidambaram said the budget showed the government has “given up on reviving the economy or accelerating the growth rate or promoting private investment or increasing efficiency or creating jobs or winning a greater share of world trade.”

'In 2019-20, the finance minister failed to meet any of the key budget estimate targets — nominal GDP growth, fiscal deficit, net tax revenue collection, disinvestment revenue or total expenditure. There’s no assurance that she will meet targets set for 2020-21,' Chidambaram added.

Sitharaman said that the government will double farmer incomes by 2022 and improve infrastructure and spend more on health care. She also said the government plans to spend more for agriculture and allied activities, and commerce, and combat worsening air pollution in the country.

The government has set its divestment target for next year even higher than for the current year, which it will miss by a mile. The government initially hoped to collect Rs 1.05 lakh crore this year through divestments, but that’s been cut to Rs 65,000 crore. Undeterred, the government’s aiming to raise Rs 2.1 lakh crore in the next year of which it hopes to get the lion’s share from selling an as yet unquantified stake in LIC.

The announcement of the plan to divest a chunk of LIC comes just after the government said it would sell 100 per cent of state-owned carrier Air India following lack of investor interest in a smaller stake sale.

West Bengal chief minister Mamata Banerjee tweeted her dismay about the government’s privatisation plans. “I am shocked & appalled to see how the Central Government plans to ambush the heritage & legacy of public institutions,” she said. “Is it also the end of an era?” she asked, mentioning LIC, Indian Railways, Air India and BSNL.

In one move to spur infrastructure investments, the government plans to grant 100 per cent tax exemptions for sovereign wealth funds for their investments in infrastructure which was greeted with enthusiasm by some financial experts. The announcement “is significantly positive for new investments in the sector,” said Rahul Mody, head of infrastructure at Ambit Corporate Finance.

But other sectors weren’t happy. “The Indian automobile industry was looking forward to some direct benefits in the budget” to revive demand and assist in the “huge investments made by the industry for transition to BS-VI and from that aspect, the Budget speech was not what we were expecting,” industry body SIAM’s president Rajan Wadhera said.

Critics like Congress leader Rahul Gandhi also faulted the government for failing to come up with any major steps to tackle unemployment which is at a 45-year high. “The biggest problem in front of the country is unemployment and the government has not addressed that,” he said.

Summing up a lot of the reaction from the financial sector, Mumbai financial services firm Centrum said that, “the government has walked a few steps forward to bring back economic momentum, but a lot more remains unaccomplished.”