With the Central government set to initiate pre-budget deliberations on October 14, officials claim the third quarter results of companies hold the key for how the second budget would pan out for India Inc. "The pre-budget meetings will start from October 14. While internal deliberations will already review the internal economic scenario, the budget announcement will majorly depend on how the economy is performing in the third quarter," a senior finance ministry official told this publication.
The ministry has already issued an internal circulation in this regard. “The pre-budget/RE (revised estimate) meetings will begin on the October 14, 2019. All financial advisers should ensure that the necessary details related to these meetings are contained in the RE module of the UBIS (Union Budget Information System),” said the Budget Circular (2020-21) of the Department of Economic Affairs’ budget division.
The pre-budget meeting will discuss critical issues pertaining to slowdown in growth and subdued revenue collection. “The revenue collection, including GST collection, is a matter of concern. The government has initiated many steps to boost the economy. This should start improving consumption on the back of festivities. In this context, Q3 results will be a litmus test on how the economy has responded to the slew of announcements,” the official added.
In the second quarter of 2019, GDP grew by just 5 per cent, marking the fifth consecutive quarter of declining growth, forcing the government to take a slew of measures including the radical decision of slashing of corporate tax. Announcing the same, the Union Finance Minister Nirmala Sitharaman had expressed confidence that the economy will start recovering from the third quarter, though the growth may not be on the same level as before.
Taking cognisance of the worsening slowdown, the Reserve Bank of India (RBI), on October 4, cut its economic growth forecast for 2019-20 to 6.1 per cent, a huge downward revision of 80 basis points (bps) from the projection it made at the Monetary Policy Meeting in August 2019.
The central bank’s Consumer Confidence Survey, which is conducted across 13 major cities and nearly 5,200 households, shows that sentiment around income, employment and discretionary spending has dropped to 89 points — for the first time below 90 in the last five years.
In this context, what measures the Central government will adopt to support the economy in the upcoming budget, given its limited fiscal headroom currently, holds significance.
The Budget 2020-21 is likely to be presented on February 1. It will be the second budget of the NDA-II government.