General Union Budget for financial year 2020-21 is under the conventional halwa ceremony. The Finance Minister Nirmala Sitaraman will present the budget on 1st February 2020. In this week, three major events happened from an economic perspective to India.
First, the Prime Minister, on last Monday, had invited some big capitalists to discuss the economic status of the country, development and issue of employment creation. This meeting was important because it was conveyed just before the upcoming budget. Yes, there should be such discussions in the interest of the Indian economy. The capitalist holds an important place in the country’s economy. The government must consider their opinions from them on various policies. It will be more significant, if the Prime Minister also invites some farmers across the country to discuss their issues before the budget. Well, in this important meeting, business icons like Mukesh Ambani, Gautam Adani, Ratan Tata, Anand Mahindra, and Sunil Bharti Mittal had participated.
Secondly, throughout NITI Aayog, Prime Minister Shri Narendra Modi has invited suggestions from the repute economists and the experts of different area to tackle the prevailing slowdown in Indian economy. In this meeting, the Minister of Home affairs Shri Amit Shah, Road and Transport Minister Shri Nitin Gadkari, Commerce and Railway Minister Piyush Goyal, Vice President of NITI Aayog Rajiv Kumar, CEO of NITI Aayog Amitabh Kant and chairman of Prime Minister’s Economic Advisory Council Vivek Debroy were seen. Finance Minister Nirmala Sitharaman could not join this important meeting because she was busy in an urgent meeting with Delhi BJP leaders. So, here the question is why Nirmala Sitaraman did not postpone the meeting with party leaders to attend such a crucial meeting on the economy? Is it important than the national economy? In this meeting, economists and experts advised the Prime Minister to speed up the government expenditure and investment to speed up economic growth by keeping fiscal concerns aside. They also suggested to restore the reliability of economic data. According to an economist present in the meeting, fiscal discipline is good, but considering the scope of economic sluggish, it needs to be kept aside for some time. This is a challenging time for the economy and government can boost up the growth by increasing fiscal provision.
The figure of fiscal deficit is very important from the perspective of reliability of data. According to official data, the fiscal deficit is almost 3.4 per cent to GDP. But there is an incredibility in it. The government is not involved in large debt traps, debts that have been taken apart from the budget. Recently, India’s former Chief Economic Advisor, Arvind Subramaniam has written a research paper titled ‘India’s Great Slowdown’ for Howard University (refer to Howard University’s website). Arvind Subramaniam mentions that the silent fiscal stimulus also becomes a big cause behind the current economic slug of India. He believes that the government is not taking the debts of Food Corporation of India and the National Highway Authority of India in the official account. According to this Paper, the total of Central Government debts, state government debt and the off-balance sheet debts of Central government is 8.8% of total GDP.
Third, it is concerned with ‘National Statistical Office’. In the year 2019-20, India’s economic growth rate is expected to be 5 per cent, which is 1.8 per cent less than last year. After the global economic recession 2008-09, it is the biggest decline till now. This is the biggest fall in the last 11 years. Nominal GDP growth rate will be barely 7.53 per cent in 2019-20. Nominal GDP Growth Rate is at the lowest level of 45 years. This is at the lowest level of after 1975-76. Now, what is this real GDP and Nominal GDP? Real GDP shows total goods and services produced in a year at constant price/ base year price. It does not include inflation. Nominal GDP says that where the total statistics have reached in the production and the prices in the production. That is, it considers inflation. If we remove inflation from the nominal GDP then we will stand at a figure of real GDP.
In the context of investment, the NSO has said that its growth rate will be 0.97%, which is the lowest in the last 15 years. In the context of GDP, a word is used ‘Gross Fixed Capital Formation’. As per NSO, its growth estimate is 0.5 per cent, which is the lowest in the last two decades. Manufacturing sector will increase at the rate of 2 per cent in the financial year of 2019-20, which is the lowest after 2006. Currently service sector can be seen as the foundation of Indian economy. It is because at the present, the service sector is contributing more to the total GDP. According to NSO, the growth rate of the service sector is also weakening in the financial year 2019-20. According to the available data, it will mark growth of 6.8 per cent which is less than 7.5 per cent of the previous financial year.
The government wants to double the income of farmers by 2022, but according to the data of NSO, the agricultural growth rate is going to be 2.8 per cent. Last year, the agricultural growth rate was 2.9 per cent. In order to double the income, the income of farmers should increase at 10.41 per cent annually.
The upcoming general budget will direct India’s economic scenario for next couple of year. The union government has to initiate stringent actions for economic revival. For this purpose, government has to be very vigilant stimulate government expenditure in the midst of decreasing revenue. Further, flexible investment opportunities can also induce private and foreign investors for making handsome investment in the economy. At last, this budget will be a test of Modi government on multi-layered socio-eco-pol-emotional aspects.
(Writer is a student of FoC, BHU and Founder and President of Finance and Economics Think Council)