G R A N D M A R K & ASSOCIATES (GMA) takes pleasure in presenting a critical analysis of Budget 2020. We present this analysis after going through the Finance bill thoroughly. Our Budget Analysis is a team-work of Partners where we try to explain critical issues in the most simplistic manner.
The 6th Union budget of Modi Era was presented by Honourable Finance Minister Ms. Nirmala Sitharaman on 1st Feb 2020. The entire CA fraternity eagerly waits for this event and they read it, analyze it, interpret it and share their views with fellow professionals, clients and society at large. Domestic and global investors, economists, the business community and society expect a lot from the budget.
In the process of preparation of the budget, the Finance minister starts meeting with various stakeholders like Representatives of Industry, Trade unions, Farmers associations, and professional bodies like CAs, FICCI, ASSOCHAM, CII etc. to know their views, their expectations, their demands and also to take their suggestions. All this is listed out and core budget team incorporates some of the suggestions and preparation of budget is started. But has all this happened in the current budget? Has Ms Sitaraman incorporated the views of all these stakeholders or anyone in the Finance Ministry gone through various suggestions and key inputs? I really doubt. Pre-budget meetings with Industry Experts held just ten days before the presentation of budget was just a formality. Ms Sitharaman was not even present in that meeting.
There were a lot of expectations from the budget because our economy is facing severe crises, as almost all the economic parameters have gone haywire. There’s lack of demand in the market, GST collection is rising not because of growth but tweaking of rates and sectors like Construction, Automobile, Finance and Agriculture are facing an unprecedented crisis. Our ranking on Ease of Doing Business and Ease of living is very low. There are several procedural flaws in GST which need to be addressed.
Everyone was looking at the Finance Minister with the hope that the budget would give direction to the economy which shall put the country on a growth path. But all the expectations were doomed after the presentation of the budget. Govt could not announce any big incentive for any sector. Important sectors like Construction and Automobile were completely neglected. There could be two reasons for that, either the Govt is short of resources or it feels no need for any stimulus or package. The economy needed some direction and stimulus from the budget, but nothing was there in the kitty of FM to boost the economy. Some minor tax cuts are announced but those tax cuts are at a cost which is much higher than the benefits that will accrue on availing those tax benefits.
We believe, Budget 2020 was an opportunity missed in terms of raising the animal spirit by fuelling the growth at the cost of an expanded fiscal deficit. Finance minister had two options – either loosening the purse to buy some growth or to continue with FRBM roadmap and the choice tilted towards the latter path. The fiscal deficit was pegged at 3.5% for FY2020-21 and a big fiscal expansion was given a miss.
A detailed critical appraisal is prepared by GMA team, do have a look and give your feedback on the same.
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