Budget 2019 Revisited

The budget presented by the NDA government was put forth by the first full-time woman finance minister on July 5^th, 2019. Mrs Nirmala Sitharaman delivered a budget that made some believe that it was largely plagiarized from Arun Jaitley’s budget and others opined that it had little effect on the economy. Regardless, the policy implications would fall upon corporates, economic growth, general public which meant that it was crucial for the NDA-II government to target sectors that would boost growth, enough to reach a valuation of a $5 trillion economy; a target that may prove to be delusional or a success after evaluating the measures taken by the government through this budget.

When looked at the sectors affected, the highest impression falls upon sectors such as agriculture, renewables, labour and infrastructure. Particularly, the government did not fail to recognize the distress faced by the agricultural sector. Increase in spending to cater for the agricultural sector meant that the government aimed to double the income of small farmers through a scheme called ‘(which primarily deals with farming methods that abstain from using chemical fertilizers in addition to providing inexpensive methods to access markets) in an attempt to reduce input costs and additionally implement to reach this goal by 2022. The government also ensured to cater to small and medium-sized farmers by setting up 10,000 Farmer Producer Organizations to reap maximum benefit by accumulating the capital necessary. This would substantially boost the efficiency of small farmers by improving on economies of scale. In an attempt to improve the prospects of India in terms of their ranking on the ease of doing business, the budget proposed schemes like SFURTI and ASPIRE to generate skilled rural entrepreneurs. In addition to these schemes, the government allocated funds towards water supply, infrastructure, online trading platforms to sustain the agricultural sector.

Being an economy, robust with its renewable energy and ranking 3^rd in the world in terms of its Renewable Energy Country Attractiveness Index, the budget maintained the expenditure towards renewable energy sources. The budget laid lesser emphasis on green energy and proposed for a marginal increase from Rs 5147 crore to Rs 5255 crore in the budget allocated towards renewable energy out of which, Rs 3004 crore would be dedicated towards the solar power sector. Mrs Sitharaman did not fail to mention the guarantee the providing an electricity connection to all rural households, who lack these benefits, in addition to solar stoves through schemes such as Ujjwala. This would not only help in boosting renewables but would also prove to be a benefactor for Make in India as the manufacturing of these renewables are carried out internally. The targets for this scheme might seem far-fetched as the government has aimed to reach 40 GW of solar rooftops which would require a scheme solely dedicated for this along with capital to reach this target by 2022.

Apart from renewables and agriculture, the next fundamental sector primarily targeted by the Modi government was infrastructure. This move by the government indirectly benefited real estate and employment. In addition, they emphasized on the increase of connectivity to rural under the Bharatmala, Sagarmala, UDAN and PMGSY. Furthermore, the government successfully set aside Rs 80,250 crore to improve the connectivity covering a distance of 30,000 km of roads to rural areas. In sum, the government set aside Rs 100 lakh crore to fund infrastructure projects in the country in order to meet digital and physical connectivity in the country through these schemes. Given that infrastructure will play a significant role to determine the long-term growth of the country as the economy is becoming cashless and competing globally with other economies, this step was a prerequisite in that direction.

There were also a number of miscellaneous expenses in the budget as per the revenue available with the government. Given that India gets a boost from its startup refinement, the government announced a host of programs for startups on DD to increase awareness of startups in addition to exemption from scrutiny after for those who file information on their return. They also went forth to support women entrepreneurs by enabling loans worth 1 lakh under the MUDRA scheme. It was also proposed that NRIs would get alternative routes for investment in the capital market through Foreign Portfolio Investments. They successfully set aside Rs 350 crore solely towards a 2% grant for interest for Micro, Small and Medium Enterprises for fresh and incremental loan amounts.

All in all, the budget focused on sustainability for specific sectors and proved to ignored the demands of a few. Broadly, it benefited agriculture and infrastructure however failed to heed the need to expand private investments which are essentially the need of the hour. Other problems faced by the country relate to job security, defense expenditure and pressure on the RBI to extend additional dividend which has raised questions about the autonomy of the RBI. The $5 trillion economy target by 2024-25 seems glorious and given that we have reached $2.7 trillion now and the Prime Minister explained how this goal is achievable as the economy stood at $1.85 trillion 5 years ago.

However, economists remain skeptical as this goal seems to be fanciful rather than viable without a definite blueprint to reach that $5 trillion mark without the element of a boost in investment and capital expenditure in the economy for which the budget does not lay down definite schemes or proposals for that particular sector. Experts opine that a definite plan of action lacks without emphasis on the increase in private investors and lack of disinvestment as a result of which the figure seems to stand as a dream rather than a goal. Medium-term goals may be met by the government through a sustainable approach by focusing on welfare, however; it is in the interest for both the government and the economy, in the long run, to focus on investments rather than government expenditure. A plan of action rather than a number on a piece of paper is the need of the hour as the effects of global turmoil might strike the nation any time soon as the world prepares for another recession perhaps in 2020.

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