A Budget That Goes Nowhere

jatin
By jatin July 6, 2019 13:04

Rammanohar Reddy, Editor of The India Forum expressed his views on the budget

Important Analysis

  • He criticized government projections of economic growth
    • The economy grew by just 5.8% in real terms in the last quarter of 2018-19. Yet, the Union Budget for 2019-20 assumes that the economy will grow this year by 12% in nominal terms, or by 7-8% in real terms.
  • There is little in the Budget that is likely to boost domestic private investment.
    • There are neither any incentives for private investment nor support for public investment.
    • To make matters worse, the Budget has actually projected a decline in central government capital expenditure (public investment) in 2019-20 by 6% in nominal terms.
    • This is perhaps the first ever decline in public investment in the past half century, which, once adjusted for inflation, could measure over 10%.
  • The government is unable to catalyze domestic investment or fund public investment, it is now turning abroad to fuel growth.
    • Some of the norms for foreign institutional investment (FII) are to be liberalized, so too for foreign portfolio investment (FPI) and ceilings on foreign direct investment (FDI) are to be raised in some sectors.
    • The government has now decided to go in for external commercial borrowings to meet part of its borrowing requirements, claiming that India’s external debt to GDP ratio is very small.
  • It is significant that the word “jobs” found no mention in the Finance Minister’s speech.
  • The approach of the government is to focus on a select group of welfare schemes like Ujjwala Yojana, Swachh Bharat, Sowbhagya and Jan Dhan and now Jal Shakti while leaving it to private investment or private consumption to deliver economic growth.
  • In order to hold down the fiscal deficit, the government cut its expenditure by ₹1.33 trillion.
    • There is a decline in gross tax receipts from 11.9% of GDP (2018-19) to 11.7% of GDP (2019-20), arising from a slump in both direct and indirect taxes.
  • Against cooperative federalism
    • A major source of revenue mobilization is to come from a higher cess and special additional excise duty on petrol/diesel. That is good for the Centre because cesses are not to be shared with the States

Also read: Economic Survey 2018-2019 Analysis

Union Budget 2019-20 – Full Explanation

Source

jatin
By jatin July 6, 2019 13:04