Will the first Budget of the Modi 2.0 government be a please-all or will it seek to administer some pain?
Finance Minister Nirmala Sitharaman may be tempted to do a bit of both, though Economic Survey 2018-19 hints that big-ticket announcements are unlikely as it forecasts a 7% GDP growth for FY20 — a marginal rise from last year’s 6.8%.
The economy needs an urgent boost but tax collections are not promising. The FM may be compelled to borrow, but only after ensuring the government doesn’t shy away from its planned fiscal consolidation drive. Sitharaman may shrug off FY19’s lower revenues as a one-off event and make modest growth projections for FY20, which is to say fresh borrowings could hover around Rs 7.1 lakh crore.
Chief Economic Adviser Krishnamurthy Subramanian, the Survey’s architect, notes India needs to double its infra spend to $200 billion against the current run rate of $1 00-110 billion, but finding funds could be a challenge.
Fire sale of state-run entities could help find the monies, but the market is replete with buyers jockeying for bargains. Unless the jinx is broken, divestment proceeds, which is likely to be pegged in excess of Rs 90,000 crore, will miss estimates. In line with tradition, Budget 2020 may include a bailout package for state-run entities like BSNL and MTNL. Emboldened by improving performance of the banking sector, Sitharaman may propose to increase FDI in the sector, ending decades of hand wringing.
The government took five years to align its tax base and tax rates. Now, taxpayers expect a bonanza. While individuals want higher exemptions — currently at Rs 3 lakh income per annum and lower tax rates — corporates hope Sitharaman’s Budget will walk the talk on the promised 25 per cent tax slab for all businesses. Given that tax revenue is already weak in the knees, Friday’s Budget is unlikely to play to the gallery with drastic tax give-aways.
None expects a dream Budget, though industry and investors hope it will at least spell out the roadmap of NDA-II’s structural reforms strategy that will culminate in a $5 trillion Indian economy by 2025.
ALSO READ | Expect first budget of Modi 2.0 to be pro-people
What the survey says
Investment level should be ramped up to above 35% of GDP to achieve 8% sustained growth, make India a $5-trillion economy by 2024-25
At present, India’s investment level as percentage of GDP is 29.3%