Union Finance Minister Nirmala Sitaraman will present the Budget for next financial year today. So it is time to take an impassioned look at the Indian economy.
Over the past few months, a slew of reports have trickled in indicating that the economy is not doing great. The latest one is the report on World Growth projects which says the Indian GDP is projected to grow at 4.8% during the current fiscal which is perhaps the lowest.
Not only Tthe GDP is faltering, there are high unemployment rate, lowest consumption in 45 years, credit growth in single digit, rising inflation, erratic Industrial Production, lingering NPA, lack of demand and low capacity utilisation.
To make the matter worse, the fiscal deficit has already hit 114.8 per cent of 2019-20 Budget Estimate at Rs 8.07 lakh crore at the end of November. The Govt is likely to miss its budgeted target of 3.3%.
The fiscal deficit has resulted because of three reasons. First, the Govt has given a boost to the industry by giving a soap of about Rs 1.45 lakh crore. The second is the lower collection of GST. The third is Govt will certainly miss the disinvestment target of budgeted Rs 1.01 lakh crore.If the Govt does not meet the revenue target what will it do? There is no other option but to cut down expenditure and postpone payments to states.
Worries for Odisha
The expenditure cut will affect every State and more so poorer states like Odisha. After GST, there is not much scope of generating additional revenue for the states. After the changes in revenue royalty system for mineral resources, the sector is in a state of limbo. So the State has to entirely depend on its share of revenue from the Centre. But if there will be an expenditure cut, it will result in lower transfer of money. As of today, the Centre has transferred Rs 3,66,871 crore to the states as devolution of share of taxes. It is Rs 10,205 crore less than the previous year.I can give one example of my Department. We are yet to receive around Rs 4,602 crore as dues for payment of MSP to the paddy farmers due against procurement till December 2019. But keeping in mind the interest of the farmers for uninterrupted paddy procurement, the Department is raising money from the market at high-interest rate.
Data Credibility: Crisis of Confidence
The biggest problem this Govt is facing is data-credibility. Over the past few years there is growing suspicion among economists that the true picture of the Indian economy is not being told by this Govt. Two members including Chairman of Statistical Commission resigned as Govt refused to release the data of unemployment which has hit 45-year high at 6.1%. Similarly, the Household Consumer Expenditure in India survey conducted by the National Statistical Office (NSO) states that the average monthly spending by an individual fell to Rs 1,446 in 2017-18 from Rs 1,501 in 2011-12, down by 3.7 per cent. However, this data was not released because of an adverse finding.
Challenges for Nirmala
Everybody now eagerly awaits what comes out from the Bahi-Khata of the Finance Minister Nirmala Sitaraman. On the face of it, there is nothing much she can do except fiddling with the personal income tax because the indirect tax issues will be settled by the GST council. There are more worrying signs. India’s electricity demand fell by 13% in October due to the sharp reduction in off-take from the industrialised states like Gujarat and Maharashtra. The telecom sector is in doldrums, the infrastructure sector is even worse and ‘Make in India’ has not taken off. The latest data show that domestic air passenger traffic growth fell to 3.74% from 18.60% in 2018.
So the best the finance minister can do and must do is to accelerate public spending. For this to happen, more money needs to be put in the pocket of the consumer, major rejig has to be done in GST and there is a need to move towards a revenue-neutral rate of about 15.4% against the current 11.8%.
For Odisha, we will have to keep a tight vigil on these developments and address the issue of economic growth in the proper perspective to realise the dream of economically stronger Odisha. I am sure under the visionary leadership of our Chief Minister Naveen Pattnaik, the State will not only tide over the man-made crisis but will continue to grow bringing all round development for all.
Ranendra Pratap Swain
Minister for Food Supply, Consumer Welfare and Cooperation
(The views expressed in the article are purely of the personal opinion of the author and does not reflect the views of either the party or the Govt)