Pre-Budget meetings: Suggestions galore as FM Nirmala Sitharaman ends consultations

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December 24, 2020 4:15 AM

Union Budget 2021 Expectations for bond market: As for disinvestment, the government had budgeted an ambitious disinvestment target of Rs 2.1 lakh crore for FY21.

Budget 2021 Expectations for bond market: Sitharaman’s last meeting was with a second group of economists; the first one with economists was held on Saturday.Budget 2021 Expectations for bond market: Sitharaman’s last meeting was with a second group of economists; the first one with economists was held on Saturday.

Union Budget 2021-22 Expectations for privatising PSUs: Finance minister Nirmala Sitharaman concluded her pre-Budget consultations on Wednesday, having held 15 virtual meetings over nine days with more than 170 invitees representing nine stakeholder groups. They presented her with dozens of suggestions — from focussing on growth and reforms to deepening the bond market and privatising PSUs — for adoption in the Budget for FY22 to get the Covid-ravaged economy back on the high-growth path.

Sitharaman’s last meeting was with a second group of economists; the first one with economists was held on Saturday.

Economists are learnt to have asked the government to bolster spending and resort to aggressive divestment and asset monetisation to partly fund the expenditure. They also highlighted the need for continuous and bold reforms, mainly in the factors of production.

Growth should be the prime objective of the Budget for FY22 and the government need not worry much about the fiscal deficit target, they reckon.

In the near-absence of private investments in the aftermath of the pandemic, the role of government spending as a growth catalyst assumed utmost importance.

Although government consumption expenditure fell 22% on year in the September quarter, there have since been signs of improvement. The Centre’s budget spending rose 9.5% on year in October and budgetary capex was up 130% in the month, at Rs 31,519 crore. Economic affairs secretary Tarun Bajaj last week said government’s capital expenditure went up by as much as 15%, year on year, in November and overall spending rose by 5%.

Thanks to lower-than-expected contraction in real GDP in the September quarter (7.5% vs a record 23.9% slide in Q1), some agencies have bettered their projections for this fiscal and projected a rebound next year. The latest projections for a contraction in India’s real GDP for FY21 are in the 7.7-10% range, with an expectation of a sharp rebound (9-11% expansion) in the next fiscal.

As for disinvestment, the government had budgeted an ambitious disinvestment target of Rs 2.1 lakh crore for FY21. However, the disinvestment receipts so far have been about Rs 10,900 crore or 5% of the FY21 target, thanks to the pandemic.

The economists who attended Wednesday’s meeting included Amiyatosh Purnanandam of the University of Michigan; Pranjul Bhandari, chief India economist at HSBC; and Soumya Kanti Ghosh, group chief economic advisor at SBI. Those who attended the meeting on Saturday included Rakesh Mohan, former deputy governor of the RBI; Surjit S Bhalla, executive director for India at the IMF; Ajit Ranade, chief economist at Aditya Birla Group; and Arvind Virmani, former chief economic advisor.

The stakeholder groups which participated in the pre-budget meetings with Sitharaman since December 14 include players and experts in financial and capital markets; health, education and rural development; water and sanitation; trade union and labour organisations; industry, services and trade; infrastructure, energy and climate change; agriculture and agro-processing industry; industrialists; and economists.

Over the course of her meetings, the minister received suggestions on various subjects, including fiscal policies and taxes; deepening the bond markets; infrastructure spending; raising health and education budgets; MGNREGA; ease of doing business; production-linked investment scheme and exports, the finance ministry said in the statement.

The experts stated that “India is among very few countries whose economic activity has risen with declining pandemic induced fatalities”.

The meetings were also attended by minister of state for finance & corporate affairs Anurag Singh Thakur and top finance ministry officials.

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