Nirmala Sitharaman will present its first budget, challenge to boost economy

Finance Minister Nirmala Sitharaman is going to present the first budget of the second term of Prime Minister Narendra Modi-led government at 11 am on July 5. They will have to face many challenges like slowing down the economy going through sluggishness, increasing employment and increasing the income of farmers. At the same time, with the larger mandate, the returning government will not be easy to meet the public’s expectations.

Economy at the bottom of 5 years

The government will have to take several major steps to accelerate the GDP. GDP growth was 5.8 per cent in the January-March, 2019 quarter, which was a 5-year low. With this growth India lost the fastest growing economy status to China. China’s growth was 6.4 percent during this period.

Focus on Rural Slowdown

There is a situation of rural slowdown in the economy, difficulties on demand and demand front also remain. It is hoped that Sitharaman could announce many ways to boost the domestic consummation, extract all of the rural slowdown and support the MSME sector.

Increase tax collection

In fiscal year 2018-19, the total tax collection decreased to 10.9 percent compared to GDP. Therefore, without increasing the tax burden on taxpayers in front of the Finance Minister, the Modi Government will have to explore new resources for continuing the welfare programs. It is believed that Sitharaman could extend the income tax in the budget to the Consumers.

Focus on ‘water’

While the Modi Government’s emphasis is on building rural and social schemes, the budget can be declared as ‘Water’ schemes. According to media reports, every household can get a piped water supply scheme by 2024. It is also anticipated that the Finance Minister can do the initial allocation for the ‘Water Livelihood Mission’ and ‘Water From Taps’ Initiative. The newly formed Jal Shakti Mantri may be the nodal ministry for them. There were also discussions of such schemes in Rajasthan during the 2019 Lok Sabha elections. At the same time budget allocation for water related schemes can be increased.

Eyes on old plans

In the Budget, old schemes such as PM farmer, MNREGA and health and education programs can also get a lot of space. It is estimated that the allocation of money for PM Farmers and MGNREGA schemes is mainly going to increase. 75 thousand crore rupees have already been allocated for the year 2019-20 under the PM Kisan Scheme.

Difficult to increase fiscal deficit

The government is considering to keep the fiscal deficit target at 3.4% level compared to GDP. However, the recommendation of the 15th Pay Commission will be the biggest challenge ahead of this, which will reduce the tax pool of both the central and the states. PM Modi also looks after maintaining fiscal disinfection. According to experts, increase of 10 basis points, i.e. 0.10 per cent in fiscal deficit, will increase the scope for additional expenditure of Rs 21,000 crore for the government.

Dependence will increase on disinvestment

In this situation, the government’s non-tax revenues and dependence on disinvestment will increase. The government is also heavily dependent on the surplus present with the Reserve Bank and is hoping that Bimal Jalan Panel can make such recommendation. However, according to the media reports, there is little hope for such a Jalan panel recommendation.

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