Union Budget 2020: This Budget Speech of the finance minister was one of the longest in recent history. Her previous Budget speech in July last year was around 11,000 words. This one was more than 13,000.
Part A of the speech went from 8,000 words to 9,000. Part B went from 3,000 to 4,000. This depicts the relative importance attributed to the plans and schemes of the government and changing tax structures. The FM’s pictorial depiction of the bouquet of government schemes held by two caring hands of governance and financial sector reinforces the work required in building and unclogging the plumbing of the BFSI sector.
There are many proposals that build on the agenda of liberalisation and privatisation such as the proposed Initial Public Offering (IPO) of Life Insurance Corporation (LIC), enabling sourcing for foreign direct investment (FDI) in education, corporatisation and listing of a port, involving private sector in the four station redevelopments and many trains, encouraging signals to the foreign portfolio investors (FPIs) for investing in corporate bonds (from 9% to 15% of outstanding bonds), and to sovereign wealth funds (SWF) to invest in infrastructure.
The elevated levels of FDI to $284 billion over FY2014-19 from $190 billion over FY2009-14 was highlighted. Across soft and hard infrastructure, hence, “it would mean yielding more space for the private sector”. It will be interesting to observe how the proportion of financing for such initiatives evolves between local and foreign over the years, especially as the local financial savings have dipped over the last few years even as space for foreign funding has opened up.
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On a similar note, there are many proposals that build on the importance of the government and of its expected ability to create transformative changes. Kisan Rail, Krishi UDAN, solar grids on fallow and railway lands, Jal Jeevan Mission, Bharat Net, ODF+, five new smart cities, hundred new airports, among many others, seek to bring in large infrastructure-related changes in the lives of ordinary Indians. A fascinating social change that the government has proposed in the Budget is the deliberation on the age of marriage for women. Interestingly, this Budget is unique in recent times, in its complete omission of the defence sector in the speech. Even as we, the readers of pink papers, focus on the macro and fiscal numbers, it is critical to keep in mind the continuing and permanent importance of government in shaping society and its economy.
Does the last Budget of this decade prepare India and its economy for the challenges of the next decade? Part A of the Budget recognises that “Artificial intelligence, Internet-of-Things (IoT), 3D printing, drones, DNA data storage, quantum computing, among others, are re-writing the world economic order.” In Part B, it says “Undue claims of FTA benefits have posed threat to domestic industry. Such imports require stringent checks.” The world is changing fast: over the next decade, India will be required to decide on how it embraces the changing the world order even as it builds stringent checks.
India’s response to this dilemma will determine whether budgets of the next decade will have larger incomes to tax or larger taxes on incomes.