Budget 2020: Tempting, Not Effective Enough or Enough to Compete China

For the last two years, the things which were being talked about to stagger the Indian economy may have been denied, but the government has accepted the figures reflecting same in the economic survey 2020. Of course, the government is blaming global economic slowdown, investment and demand for this, but in the end, it has assumed that economic sluggishness can be met only by increasing demand and investment.

Indian population is largely characterized by middle class (middle income class) people who gets the most pleasure from the exemption in its net income tax out of any budget proclamation, as the money left over with them are utilized to meet their personal expenses.The government has cleverly announced the new tax  regime, as they too feel that only the vast middle class of India will be able to bring back the hijacked Indian economy. Therefore, did not levy any tax on income up to five lakhs while increasing the income tax exemption limit. Of course, this amount will not be directly received in the government treasury, but with the help of this amount the economy will receive an impetus to its health. But the idea of ​​making this arrangement optional creates little doubt. The temperament of the Indian citizen has not yet developed so that one will come forward to pay the tax himself, so it would have been better to have made the new tax slab mandatory and not optional which invites unnecessary complexities. Further, on front of GST it has been hinted that it will be simplified  since coming April which clearly indicates that even the government is aware of the fact that GST announced earlier with uncountable amendments are still complex in nature to understand and comply with.

Along with India's large middle class, there is another large section of the country, which is the foundation of both economic and political health of the country. More than 65 percent of the population is directly or indirectly still dependent on farming activities for their subsistence but contributes about 14 percent to Indian GDP. When BJP came into power, it promised to double farmers' income by 2022 which is yet to be achieved. Moreover, the farmers’ condition has worsened in the recent past. Taking the scenario into consideration, the FM Sitharaman has not only announced 16 schemes for the farmers but has also allocated fund of Rs 2.83 lakh crore for them.Financial assistance and incentives under PM Kusum Scheme forstandalone solar pump setups, Online portal on Jaiwik Krishi, solar power unite set-up for farmers with barren land, are not only in the interest of farmers, but will also be a way to raise awareness about the growing needs on renewable energy. UN estimates that more than 40% of food produced in India is is wasted before it reaches to the final consumer. The issue lies with the basic problems in the logistics mechanism including infrastructural facilities and efficiency.Development of infrastructure (warehouses), seamless national cold supply chain will certainly be an additive to rid over the problem of wastage. But construction of warehouses on FCI and WCI land area wouldn’t be enough to deal with the problem of proper storage. Also, the minimum support price should have been redefined to help out the farmers. Now, it is to be seen that to what extent the proclamations made under 16 points action plan prove to encounter the issues of the farmers.

FM announced to hold a new education policy to bring in a paradigm shift in the educational systems with a hope to createemployment opportunities when the NSSO revealed the poor employment condition of the country characterized by lowest employment in the last 45 years. Keeping the objective of having largest working age population in world by 2030, the government has announced to incur Rs. 3000 on skill development, Rs. 8000 on national Mission on Quantum Computing & Technology, and an outlay of Rs. 99,300 crores on education sector. In the last budget (2019) Rs. 94,800 crores were allotted to the educational development in the country which has just recorded growth of 4.75 percent. The indication to take steps for sourcing External Commercial Borrowings (ECB) and FDI so as to able to deliver higher quality education is highly welcomed but domestic investment in the sector at best would have been better to attain the educational opulence of the nation.

Defence is one of the most important concern in the budget every year. Though the FM did not mention about defence budget during her budget speech but as per Defence Services Estimates (DSE) it has recorded growth of just 5.8 percent. On the other hand, defence pension bill grew by 13%.The Indian military is in the process of upgrading their ageing arsenals with new fighter jets, warships and submarines. The introduction of One Rank One Pension (OROP) naturally increased the requirement to incure heavily on defence pensions. It is significant to remember that, excluding pensions, the defence budget has just increased by 1.82 per cent. It megers the inadequate fund allocation over defence in India.

Conclusion: Only transforming the mode of presenting budget from Briefcase culture to Bahi-Khata fashion will not bring the desired result to the economy.The budget has hinted the introduction of new education policy, but why the government failed to introduce a new education policy in its last five-year tenure and why the smooth GST system could not be implemented during . It is also significant to note that ed-tach and skill-tech sectors should have been given benefits (incentives/tax exemptions) to ameliorate the tech & skill education along-with its separate allocation for the same. If we talk of The defence budget (minus pensions) is currently around 1.8% of the GDP. As per the defence analysts, it is one of the lowest since the 1962. The government clubs the defence budget with pensions to claim it is over 2% of the GDP. We keep on comparing ourselves with Chinese economy but we don’t look into the difference of the figure of allocation. China spent approximately 2 times more than India on health, 4 times more than India on its defence and approximately 30 time more than India on education during the last budget year. It is also surprising that the total budget amount of India in 2020 is for Rs. 30,42, 230 crores, which is some where equal to the expenditure made by China last year only on education. Keeping these issues in mind it can be concluded that, the government is coming up with set of schemes in every budget to lure the people but its improper implementation, execution and lack of fund allocation on defence, education, health and other infrastructural development is not hepling the nation to wake out and perform.

Dr. Sameer Shekhar,
Post Doctoral Researcher, Indian Institute of Foreign Trade (IIFT), New Delhi, India

(Written on - 08.02.2020 and published in FETC newslette in March 2020)