The budget 2019-2020 was full of highs, high expectations, high growths, high results. But the center of attraction was the Finance Minister herself, as she presented her maiden budget, becoming only the second woman, after Indira Gandhi, to do so.
Talking about expectations, they were really high as it was the comeback year for our Prime Minister Narendra Modi, following a bigger mandate at his first term. And there where are expectations, there come challenges. Here we are to talk about the challenges our Finance Minister faced.
Among many other challenges, one was the Gross Domestic Product(GDP) growth slumped to a five-year low of 5.8 per cent in the January-March quarter. This is because of India’s lost title of world’s fastest growing economy to China. Also, surprisingly, it was officially confirmed that unemployment has touched a 45-year high. There were clear signs of a rural slowdown, consumption and demand are suffering and private investment still remains muted. Though, Sitharaman tried hard to address boosting domestic consumption, address the rural crisis and support micro, small and medium enterprises. The expectations with Modi led government to continue its focus on rural and social schemes which will show tangible results were also high. This is why the next big move that the budget is set to make is that of ensuring piped water to every household by 2024, after rural electrification, housing, toilets and cooking gas.
The Finance Minister also was expected to provide the initial allocation for the ‘Jal Jivan Mission’ and ‘Nal se Jal’ initiative. The new Jal Shakti Ministry was also on focus, as it unifies all the functions of various departments dealing with water issues, will be the nodal ministry for this. This scheme has gathered a lot of attention from the Bharatiya Janta Party(BJP). In all of the parties leading states like Rajasthan, all the candidates and workers during the 2019 Lok Sabha election, were speaking of this scheme to rural voters. Thus, a substantial chunk of the budget speech and focus was expected to focus on water and an increase in allocation for water-related schemes.
The most popular manifesto that was also likely to make their way into budget includes ‘Matsya Sampada Yojana’ to provide storage and marketing infrastructure for fishermen, a National Traders Welfare Board, a National Warehousing Grid for farmers. Also, the focuses were continued on existing flagship schemes like PM Kisan, NREGA, and health and education programs. Increased allocation for these schemes compared to the interim budget was expected. Especially in the cases of schemes like PM Kisan and NREGA, the idea is to place more money in the hands of the rural population to enable higher spending. Over and above the Rs 75,000 crore allocation for 2019-20, the expansion of PM Kisan to all landed farmers has led to a bump of Rs 12,000 crore in the outlay.
It was said that the Finance Ministry officials were aimed to find the money for the new schemes and announcements by making adjustments within the top line, by diverting sums from other spending commitments. Also, it was expected that the center could leave as much as around Rs 62,000 crore in pending fuel and fertilizer subsidy arrears from previous years unpaid, and furthermore rollover that amounts to the financial year 2020-21.
Meanwhile, the center is looking to maintain a fiscal deficit target of 3.4 per cent of GDP for a number of reasons. One of the reason is that mainly matters in the case is the impending recommendations of the Fifteenth Finance Commission. This will lay down the devolution of the taxable pool between center and states. Before taking any call, the government was also waiting for the Finance Commission report. This is because the center wanted to get that how much it will extract from the center’s resources, before taking a call on any fiscal expansion in the 2020-21 budget, if necessary. However, another reason is as important as the first, it is our Prime Minister Narendra Modi himself. He was very particular about maintaining fiscal discipline and is said to feel strongly about the center’s credibility being tied to its ability to meet budgeted targets. This is so especially since the fiscal deficit target is now more a political decision than an economic one.
Another step which was challenging for the Finance Ministry was that the revenue situation is quite dire. The goods and services tax (GST) mop-up fell below the Rs 1-trillion-mark for the first time in four months in June. However, it grew by a meager 4.5 per cent to Rs 99,939 crore, against 6 per cent growth in May. Seeing the projected growth in state GST (SGST), the interim budget required collections to touch Rs 1.3 trillion a month. Especially with a shortfall, the target might become daunting.
Before the budget was presented, the figure showed that corporate tax collections expected to be higher by 15 per cent in 2019-20 over actual collections in 2018-19 and that personal income tax collections would increase by an even greater proportion — by 34 per cent. Yet another challenge. And next in the queue was the Central Board of Direct Taxes has asked for a reduction of the target as growth is wavering. Closely related to the health of the economy the GST collections were expected to increase by 31 per cent in the interim Budget for 2019-20 over actual collections in 2018-19.
By all means, we can say that overall, the 2019 budget signals more of continuity than change and represented growth that has already been worked for and is been planned for the next financial year. Though the Union Budget 2019 was under heavy pressure of expectations and comeback of Modi led government, still it was well appreciated by all departments and the citizens of India as well.
