Budget 2020: Why this year’s budget is crucial; four key things to watch out

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Updated: Jan 07, 2020 3:52 PM

Budget 2020 India: With less than a month to go, on February 1, Finance Minister Nirmala Sitharaman will present the Union Budget for the next financial year 2020-21.

 

budget 2020 expectation for MSMEsUnion Budget 2020 India: The measures proposed by the government must be aimed at driving the growth in next fiscal.

Budget 2020-21: With less than a month to go, on February 1, Finance Minister Nirmala Sitharaman will present the Union Budget for the next financial year 2020-21. As India’s economic growth is not encouraging enough, it is expected of the government to present a budget that gives an impetus to boost consumption and investments in the country. India’s GDP growth for the second quarter of FY20 fell to 4.5 per cent, a six-year low. It is to be noted that in Q2FY19, the GDP growth stood at 7.1 per cent. Therefore, the measures proposed by the government must be aimed at driving the growth in next fiscal.

Here are the key indicators to watch out

Fiscal deficit: The country’s fiscal deficit has exceeded the annual target of Rs 7.04 lakh crore in the first eight month of the ongoing financial year and it has reached 114.8 per cent of the government’s budget estimate for FY20. Till November 2019, the deficit rose to Rs 8.07 lakh crore. Meanwhile, the government has received nearly Rs 10 lakh crore in revenue, which is 48.6 per cent of the annual target; whereas it incurred an expenditure of Rs 18 lakh crore, which is 65.3 per cent of the annual target.

Current account deficit: In FY20, India’s current account deficit (CAD) has reduced to 0.9 per cent of GDP accounted at $6.3 billion for the second quarter ended September 30, 2019 as against 2.9 per cent of GDP ($9 billion) in Q2FY19. The CAD was at 2 per cent of GDP ($14.2 billion) in the first quarter of current fiscal. According to the RBI, the contraction in current account deficit was on account of a lower trade deficit at $38.1 billion, compared to $50 billion a year ago.

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Unemployment: The recent data released by Centre for Monitoring Indian Economy (CMIE) shows that the country’s unemployment rate has increased to 7.7 per cent in December 2019, marginally higher than 7.48 per cent in the month of November. The numbers were relatively higher in urban areas reflecting a decline in beleaguered economic activity. More than 90 per cent of India’s labour force works in the informal and unorganized sector and unemployment, both the educated and unskilled worker is at a 45-year high. Given the lack of new investments along with automation, job prospects going forward look bleak.

Rural demand: As the consumption declines, reviving rural demand could be one of the concerns for the government to look at in the upcoming budget. Private consumption growth fell in downward spiral in the first half of the current fiscal, hit by fewer jobs, less growth in incomes along with the lack of easy credit  after non-banking finance sector became a stress. Therefore, the Indian consumer is seen to have pulled back on spending.

Indian economy, which was until last year the ‘fastest growing’ major economy, has been grappling with unprecedented slowdown. Thus, calls for major economic policy reforms in Budget 2020 are getting stronger and louder.

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