This could be the defining budget not only of the Modi government’s second term, but perhaps its entire tenure so far. From agriculture to the salaried class, every industry, interest group and stakeholder wants the govt to take bold measures to revive their sector.
GDP growth has slowed to a 26-quarter low of 4.5 per cent in quarter ended September 2019, with risks to the economy stemming from both domestic and external fronts. Domestic factors being- risk aversion in the financial sector and corporate sectors and weak private capex cycle, while uncertainty caused by US-China trade tensions in the global front.
RBI has cut the repo rate by 135 basis point in 2019 to a 10-year low of 5.15 per cent to prop up growth. The International Monetary Fund also slashed its forecast for India’s GDP growth from 6.1 per cent to 4.8 per cent.
Well, the slowdown is quite deep and spread across sectors. All eyes are on tax receipts for the current fiscal year, which would be revised in the Budget. The numbers become all the more important because actual tax collections fell short by Rs 1.91 trillion compared to what was projected in 2018-19.
Moreover, the central government has demanded Rs 10,000 crore as interim dividend from the RBI for FY20 to bridge the fiscal gap, sources said. This is the third consecutive year when the government has demanded interim dividend. Now, the Modi government may have to prioritise some sectors over others. Let's get to some of the demands:
Agriculture: Erratic weather patterns disrupted agri activities and production is expected to decline for most crops as compared to the previous years. Things that needs to be done are: Pradhan Mantri Fasal Bima Yojana needs to be revamped in terms of design, both short- and long-term measures needed to promote indigenous edible oil, need improvement in fishing gear, infra for deep sea fishing, collection, storage and traceability of harvest, export needs to be supported through awareness programmes, a multi-faceted, syste-mic approach needed for climate change issue, there is a need for planning in sowing, connecting various markets digitally for a better price discovery mechanism, and regular flow of marketable surplus
Industry: The industry has asked for greater clarity on policy and improving of the regulatory environment to safeguard investments. The call to reduce uncertainty in policy matters comes after the recent Supreme Court judgements on pending adjusted gross revenue dues of the telecom industry, which has created a pall of uncertainty over the telecom sector. Though, telecom companies heaved a temporary sigh of relief yesterday as the Department of Telecommunications issued a circular saying no coercive action should be taken against the operators for non-payment of AGR dues within the timeframe set by the Supreme Court. The apex court is scheduled to hear the matter next week. The industry has also asked for increasing export competitiveness and reviving private investment to kick-starting growth of economy.
Markets: Credible fiscal numbers and gradual consolidation, rising revenue via strategic divestment and asset monetisation are some of the measures that the markets expect from the Budget. The two biggest demands of the markets have been reduction or elimination of long-term capital gains tax on certain securities, and the shifting of dividend distribution tax on from companies to shareholders. Tax cuts (lower income categories, long-term capital gains), real estate incentives and credit support for small businesses are potential measures. Whether Sitharaman can do that or not will depend on the revenue department’s assessment of possible revenue foregone from these measures.
Economists: The most prominent recommendations from policy experts and economists has been that the centre should leave aside fiscal concerns and go for a spending stimulus to kick-start economic growth. Also, economists have been demanding that the government should show a transparent picture of its fiscal situation and bring more credibility to official data.
Salaried class: After reduction in corporate taxes, the clamour has been for an income tax cut. However, it increasingly seems like while the Finance Minister will go for some rationalization of income tax slabs, an outright reduction in rates may not be possible, given the precarious tax revenue situation. Even rate rationalization will be done in a way as to not impact budgetary considerations.
Tech/start-ups: The representatives of fintech and start-ups shared their views and suggestions regarding big data, incentives for encouraging setting up of data centres, fiscal incentives for data localisation, incentives for pushing digital penetration in rural areas, corporate guarantee to start-ups for competing with other nations.
Social sector: The requests the health, education, water and sanitation sectors include removing disparities in accessing sanitation and quality of water, scaling up rural sanitation and hygiene, decentralisation of waste management system, demand side management for water allocation, need for child budgeting, a dedicated National Fund for protection of children, better compliance of Right to Education and more financial allocation for secondary level schools.
 "What various sectors of the economy wants from Budget 2020?")
