Fiscal policy It is the government actions with respect to aggregate levels of revenue and spending. Fiscal policy is implemented though the budget and is the primary means by which the government can influence the economy.
Union Budget Union Budget is the most comprehensive report of the Government’s finances in which revenues from all sources and outlays for all activities are consolidated. The Budget also contains estimates of the Government’s accounts for the next fiscal year called Budgeted Estimates.
Finance Bill The Bill produced immediately after the presentation of the Union Budget detailing the Imposition, abolition, alteration or regulation of taxes proposed in the Budget.
Vote on Account The Vote on Account is a grant made in advance by the parliament, in respect of the estimated expenditure for a part of new financial year, pending the completion of procedure relating to the voting on the Demand for Grants and the passing of the Appropriation Act.
Excess Grants If the total expenditure under a Grant exceeds the provision allowed through its original Grant and Supplementary Grant, then, the excess requires regularization by obtaining the Excess Grant from the Parliament under Article 115 of the Constitution of India. It will have to go though the whole process as in the case of the Annual Budget, i.e. through presentation of Demands for Grants and passing of Appropriation Bills.
Budget Estimates Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.
Revised Estimates Revised Estimates are mid-year review of possible expenditure, taking into account the rest of expenditure, New Services and New instrument of Services etc. Revised Estimates are not voted by the Parliament, and hence by itself do not provide any authority for expenditure. Any additional projections made in the Revised Estimates need to be authorized for expenditure through the Parliament’s approval or by Re appropriation order.
Re-appropriations Re-appropriations allow the Government to re-appropriate provisions from one sub-head to another within the same Grant. Re-appropriation provisions may be sanctioned by a competent authority at any time before the close of the financial year to which such grant or appropriation relates. The Comptroller & Auditor General and the Public Accounts Committee reviews these re- appropriations and comments on them for taking corrective actions.
Outcome Budget From the fiscal year 2006-07, every Ministry presents a preliminary Outcome Budget to the Ministry of Finance, which is responsible for compiling them. The Outcome Budget is a progress card on what various Ministries and Departments have done with the outlays in the previous annual budget. It measures the development outcomes of all Government programs and whether the money has been spent for the purpose it was sanctioned including the outcome of the fund usage. Guillotine Parliament, unfortunately, has very limited time for scrutinising the expenditure demands of all the Ministries. So, once the prescribed period for the discussion on Demands for Grants is over, the Speaker of Lok Sabha puts all the outstanding Demands for Grants, Whether discussed or not, to the vote of the House. This process is popularly known as ‘Guillotine’. Cut Motions Motions for reduction to various Demands for Grants are made in the Form of Cut. Motions seeking to reduce the sums sought by Government on grounds of economy or difference of opinion on matters of policy or just in order to voice a grievance. GROWTH FORECASTS AND FISCAL PROJECTIONS TO BE ACHIEVED BY BUDGET 2020 Fiscal deficit of 3.5% of GDP has been set for the current financial year.Nominal GDP growth rate has been targeted at 12%of GDP.Overall GDP growth rate has been forecasted for 2020-21 at 6%-6.5% by the Economic Survey.To sustain a fast GDP growth rate and achieve a US$ 5 trillion economy target, India needs to invest 1.4 trillion dollars in infrastructure. This budget is woven around three prominent themes: 1. Aspirational India in which all sections of the society seek better standards of living, with access to health, education and better jobs. 2. Economic development for all, indicated in the Prime Minister’s exhortation of “Sabka Saath, Sabka Vikas, Sabka Vishwas”. This would entail reforms across swathes of the economy. Simultaneously, it would mean yielding more space for the private sector. Together, they would ensure higher productivity and greater efficiency. 3. Caring Society: Ours shall be a caring society that is both humane and compassionate. Antyodaya is an article of faith. Theme 1: Aspirational India Budget in this section has dealt with necessities to push up economy in such a way that it meets the demands of existing population in terms of food security, health and governance. 1. AGRICULTURE SECTOR Challenges • Agriculture sector is one of the largest sector of Indian economy has is largest employer too. It contributes meagerly 17% to GDP while more than 52% of the population is directly or indirectly dependent on it. • Currently India is second largest populous country of the world and according to the UN’s World Population Prospects report, 2019 it is expected to surpass China by 2026 to become the world’s largest country. • India is needed to foster a plan so that it can meet its goal of food security and eliminate hunger related disease such as Child Stunting, Child Wasting, Child Mortality and Undernourishment. • India currently holds 102nd position among 117 nations of the world in Global Hunger Index which is jointly published by the International Food Policy Research Institute (IFPRI), Concern Worldwide, and Welthungerhilfe (WHH). • For an agriculturally prosperous country like India, it is a cause of great concern that food produced is not distributed equally due to lack of forward linkages and storage facilities. • Further, it needs to deal with impact of climate change on agriculture, unseasonal rain and erratic monsoon in rainfed areas. • India has largest livestock population in the world which needs to be protected from various types of disease such as foot and mouth disease in cattle and peste des petits ruminants (PPR) in sheep and goat. • The total Livestock population in India stands at535.78 million in the country showing an increase of 4.6% over Livestock over the last 7 years. They are considered as an alternative means of income for farmers. • Agricultural credit is a big issue in India as large chunk of Indian farmers practice intensive agriculture and mixed farming. • Failure of crops and financial burden has often caused suicide of large number of farmers in India. 396 cases of farmer’s suicide were reported in 2019 which is huge. Hence, there is a need to counter it. • Having one of the largest coastlines in the world, Indian fisheries sector has great potential to increase India’s forex reserves by exporting marine products. How Budget proposals can help to overcome challenges? ” Sixteen Point Agenda for doubling farmer’s income by 2022 1. Adoption of Model Laws: These laws have already been enforced and to be adopted by state governments: 1. Model Agricultural Land Leasing Act, 2016 2. Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017; and 3. Model Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2018. 2. Water Security: It aims to address the water stress issue in hundred water stressed districts. 3. Solar Pumps under KUSUM Scheme: It aims to incentivize 20 lakh farmers for setting up stand-alone solar pumps and further to help another 15 lakh farmers solarise their grid-connected pump sets under KUSUM Scheme. 4. Sustainable use of fertilizers: The budget has sought to use all kinds of fertilizers including the traditional organic and other innovative fertilizers in a sustainable manner with a ‘balanced approach’. 5. Development of forward-linkages: • Proposal for geo-tagging of all warehouses which are present in the country. • Proposal for setting up of warehouses in accordance with norms set by Warehouse Development and Regulatory Authority (WDRA) at block/taluk level with Viability Gap Funding by the central government. 6. Village Storage scheme to be run by Self-help Groups (SHGs) in order to store the agricultural products and provide farmers a good holding capacity and reduce their logistics cost. 7. National Cold Supply Chain and “Kisan Rail” to be setup to provide better storage and transportation facilities for perishable agricultural goods. • Proposal of refrigerated coaches in Express and Freight trains to transport perishable agricultural products. 8. Krishi Udaan Scheme: This will be launched by the Ministry of Civil Aviation on international and national routes to transport agricultural products especially fish, meat and dairy products across the globe. 9. “One product, One district”: Scheme in horticulture sector to be supported by the central government by providing incentives to those states which support cluster-wise production of horticulture products. 10. Promotion of ‘Integrated Farming System’ in rain-fed areas to counter the vagaries of monsoon or unseasonal rain. • This will include Multi-tier cropping, bee-keeping, solar pumps, solar energy production in the non-cropping season. Zero-Budget Natural Farming will be promoted in this area to reduce the on-farm expenditure by farmers. 11. The budget proposes to strengthen Negotiable Warehousing Receipts (e-NWR) which will be integrated with e-NAM. 12. Agricultural Credit: • The budget proposes to strengthen agricultural credit by expanding refinance by NABARD and has set a target of Rs. 15 lakh crore for agricultural credit. • It has further intended to cover all eligible beneficiaries of PM-KISAN under the KCC scheme. 13. Livestock and Animal Husbandry: The budget proposes to eliminate Foot and Mouth disease and brucellosis in cattle and also Peste des Petits ruminants (PPR, commonly known as goat plague) in sheep and goat by 2025. • It also proposes to increase coverage of artificial insemination from existing 30% to 70%, development of fodder farms to produce quality fodder and doubling milk processing facility by 2025. 14. Blue Economy: It proposes to put in place a framework for the development, management, and conservation of marine fishery resources. 15. It aims to raise the production of fish and promote the growth of algae, sea-weed and cage Culture. It will further employ ‘Sagar Mitras’ to involve youths in marine processing industries and form 500 Fish Farmer Producer Organisations. 16. It aims to further help SHGs under Deen Dayal Antyodaya Yojana for the alleviation of poverty 2. HEALTH, WELLNESS, WATER AND SANITATION SECTOR Challenges • Out of the total health expenditure in India, effectively about only one-third (30%) is contributed by the public sector while 70% of total expenditure is borne by private sector. • Lack of low cost generic medicine in different parts of country sucks money from middle and lower class and increase household expenditure. • India has eliminated polio in 2012 and in process of eliminating TB by 2025. • Although, health infrastructure in major cities are good but is overcrowded by the patients from tier-2 and tier-3 cities. • Further, there is a wide gap of health infrastructure between different regions of the country especially the case of ‘Aspirational districts’, which lacks empanelled hospitals under Ayushman Bharat Mission. • Further, India needs huge investment in water infrastructure to enable reach of ‘safe drinking water’ and tapped water to every household by 2024 under “Jal Jeevan Mission” How Budget proposals can help to overcome challenges • Proposes to setup more hospitals tier-2 and tier-3 cities under the PPP model. • In the first phase, priority will be in those ‘Aspirational District’, which do not have empanelled hospitals under the ‘Ayushman Bharat’ scheme. • Eliminate TB from India by 2025 and setting up of Jan Ausadhi Kendras offering 2000 medicines and 300 surgical to all districts by 2024. 3. EDUCATION AND SKILLS SECTOR Challenges • Indian Education sector is marred by mismatch in level of requisite technical education and current demands from different sectors of economy. • Primary, secondary, higher secondary and higher education sector is equally impacted by it. • This significant gap of skill development in India, is a major concern and needs to be bridged, for us to remain competitive in the world market. This is one of the cause of unemployment in India. • There is huge employment crisis in market where the unemployment rate (UR) in both rural and urban India is at its highest since 1972. • Only 46.21 percent students were found employable or ready to take up jobs in 2019 and a decline in employability was seen in BTech, Engineering. MCA graduates, Technical & Computer-related courses according to India Skills Report, 2019. • There is also lack of doctors in the country which needs to be looked into. Currently, doctor-population ratio is of 0.62:1000 as per current population which is estimated to be of around 1.33 billion Budget proposals to overcome these challenges • ‘National Police University’ and ‘National Forensic Science University’ have been proposed. • It has also proposed to start degree level full-fledged online education programmes. • It has proposed to attach a medical college to an existing district hospital on the basis of the PPP model with the availability of Viability Gap Funding from the government. • Proposed ‘The New Education Policy’ will beat par with standards of modern education system thus improve the quality of education & marketable skills of youth. • It also proposed to start a programme where by urban local bodies across the country would provide internship opportunities to fresh engineers for a period up to one year. This will essentially help India to counter existing ‘skill gap’, persisting in the country along with other programmes such as STRIVE and ‘Young Scientist programme.’ • Further to expand the scope and infrastructure of health education, budget has proposed to attach a medical college to an existing district hospital on the basis of PPP model with availability of Viability Gap Funding from the government in case of requirement to expand infrastructure. Theme 2: Economic Development 1. INDUSTRY, COMMERCE AND INVESTMENT Challenges • Currently, country is going through a tough phase of economic development due to decline in growth rate as low as 5% of GDP and further prediction by major global agencies such as IMF to remain low at 4.8% of GDP. • Further, the industrial sector as per Index of Industrial Production (IIP) registered a growth of 0.6 per cent in 2019-20 which is very low as compared to same period. • Indian economy is chiefly impacted by crisis in telecom sector, MSME sector due to slow credit inflow and automobile sector due to deficit in demand. • The rate of unemployment coupled with economic crisis is a major challenge for India due to its huge demographic dividend. • India’s Demographic Dividend will peak around 2041, when the share of working-age, i.e. 20-59 years, population is expected to hit 59%. Hence, India needs to be prepared for it by creating employment opportunities. How Budget proposals can help to overcome challenges? • To further improve ease of doing business and faster resolution of financial issues, the budget has proposed Investment Clearance Cell that will provide “end to end” facilitation and support, including pre-investment advisory, information related to land banks and facilitate clearances at Centre and State level. • This will help to strengthen ‘Start up Ecosystem’ and will deal with dual challenge of unemployment and slow growth rate. • It has also proposed to develop five new smart cities along proposed economic corridors to adjust working population and creating a job ecosystem. Sites will be chosen on the basis of location (near economic corridors and industries to be developed) and other factors such as technical requisites and human capital availability. • National Technical Textiles Mission has been proposed which will give impetus to traditional textile industries by upgrading them with current demands of technical textiles across globe and to create an export-oriented industry of technical textiles. • NIRVIK (Niryat Rin Vikas Yojana) has been proposed by the budget to achieve higher export credit disbursement to small exporters. This includes higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim settlements. This will help to achieve the goals set by ‘Industrial Export Policy’ and ‘Agricultural Export Policy’ by 2022. 2. INFRASTRUCTURE Challenges • Infrastructure projects are highly capital intensive and funding is considered as a major impediment in achieving the infrastructure goals. • India has been marred with multiple challenges in Infrastructure sector including financing, land acquisition, Environmental Impact Assessment (EIA) and clearances from various agencies. • Along with it, lack of dedicated freight corridor in railways and roadways are also a challenge to India’s economic growth as it has impacted India’s performance in logistics sector in which it has achieved 35th rank worldwide. • India is also facing challenges in energy sector due to pollution caused by thermal power plants and recent slump in coal production. How Budget proposals can help to overcome challenges? • National Infrastructure Pipeline has been proposed to be strengthened which has already been launched with 103 lakh crore investment having 6500 projects across sector. • Budget has proposed for a National Logistics Policy to strengthen logistic sector. • It has proposed to expand the national gas grid from the present 16200 km to 27000 km which will essentially cut greenhouse gas emissions from households. • “Arth Ganga” plan has been envisaged to strengthen infrastructure along banks of the river Ganga by promoting economic activities. • It has also proposed to complete NW-2 (Dhubri to Sadiya) by 2022. • It has proposed to build infrastructure to harness solar power along the Railway tracks. It also proposed to run 150 more trains and on PPP model. It will meet energy requirements in a sustainable manner. • The budget proposed to replace conventional energy meters by prepaid smart meters in the next 3 years. • Further, it aims to connect more cities with semi-high speed trains along with fulfilling its commitment to effectively implement high-speed train corridor (Bullet Train) from Mumbai to Ahmadabad. 3. NEW ECONOMY: Assimilating New technologies and Governance ideas Challenges • Although, India has a deep telecom penetration but digital infrastructure in governance is still far behind the current norms. • High speed internet is still not available in far flunged area which is a serious cause of concern. • Advanced technologies which are being developed across the globe and are being adopted must be implemented in India. • Data centers of private multi-national companies are located outside India’s jurisdiction. This has caused serious challenges to inspection pertaining to governance, tax compliance, national security and various other issues. How Budget proposals can help to overcome challenges? • Budget has proposed a policy to enable private sector to build Data Centre parks throughout the country for better accessibility and utilization of data. • Fibre to the Home (FTTH) connections through Bharatnet will link 100,000 gram panchayats this year to comply with challenges faced by digital governance infrastructure. • The budget has proposed National Mission on Quantum Technologies and Applications be setup with a corpus of 8000 crore rupees. It will help India to comply with global standards in digital infrastructure. • Two new national level Science Schemes to create a comprehensive database of the genetic landscape of India. Theme 3: Caring Society 1. Women and Children, Social Welfare Challenges: • There are various challenges in women and child development in India starting from gaps in gender equality, wage equality, nutritional care for mother and child and gender violence among others. • Further, problems such as ‘Manual Scavenging’ which has already been abolished is still persisting in Indian society showcasing inhumane nature. How Budget proposals can help to overcome challenges? • Budget has proposed to do away with manual scavenging by introducing automated cleaning of sewer lines with new technologies. • It has also allocated a significant amount to nutrition-related programmes, which has already been running, related to women and child development and welfare of Scheduled Caste and Scheduled Tribes. It will further reduce incidences of malnutrition and improve conditions of vulnerable section of our society. 2. Culture and Tourism Challenges: • Diverse Indian mainland and geographical extent is covered with multiple cultural realms which are yet to be cashed in form of tourism and forex earning by exporting services. • Although, India has multiple heritage sites from Harappan Civilization but it lacks proper showcasing to attract tourist footfalls. • Tourism contributed to 9.2% of India’s GDP in 2018 and supported 42.673 million jobs, i.e, 8.1% of its total employment, which is too less owing to vast and culturally diverse Indian landscape. How Budget proposals can help to overcome challenges? • To develop five archaeological sites as iconic sites with onsite Museums. They are • Rakhigarhi (Haryana), • Hastinapur (Uttar Pradesh) • Shivsagar (Assam), Dholavira (Gujarat) and Adichanallur (Tamil Nadu). • A museum on Numismatics and Trade will be opened at Old Mint building Kolkata and the ‘Tribal Museum’ in Ranchi. • Setup a maritime museum at Lothal, the Harrapan age maritime site near Ahmedabad. 3. Environment and Climate Change Challenges: • Although India’s per capita Green House Gas Emission is very low as compared to rest of the world. It produces GHGs as low as half of the world’s average but due to INDCs as par with Paris Climate deal it has to cut its green house gas emission. • Pollution in cities is a major problem for India. According to a report by Green Peace, 22 of world’s 30 most polluted cities are in India. • Seasonal Smog in National Capital territory of Delhi has caused all time high pollution level causing loss to health, economy and environment. How Budget proposals can help to overcome challenges? • To achieve targets set up by the Paris Climate Deal by cutting emission and closing down those thermal plants whose emission is higher than a pre-set limit. • It also proposed to help state governments in cutting air pollution in cities. These proposals will further highlight the India’s commitment toward a greener world using sustainable development strategies. GOVERNANCE • India will host the G-20 presidency in the year 2022 – the year of the 75th anniversary of independence of Indian Nation. The budget has allocated a sum of Rs. 100 crore to begin the preparations for the event. • It has also proposed a special package for newly created union territories of Jammu and Kashmir and Ladakh. FINANCIAL SECTOR • It has proposed to increase Deposit Insurance Coverage for a depositor under Deposit Insurance and Credit Guarantee Corporation (DICGC) from Rs. one lakh to Rs. five lakh per depositor. • It has proposed to strengthen the Cooperative Banks by amendments to the Banking Regulation Act. • It has proposed to sell the balance holding of Government of India IDBI Bank to private, retail and institutional investors through the stock exchange. • Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE) has been proposed by the budget to provide subordinate debt for entrepreneurs of MSMEs. TAXATION Challenges • Complex taxation system coupled with heavy taxes with surcharges has compelled foreign investors to keep away from Indian economy. • Taxes such as Dividend Distribution Tax (DDT) on shareholders dividends was a burden on brokers. • India’s tax base is narrow has become narrower due to low collection of GST. India’s gross tax-to-gdp ratio fell to 10.9 per cent in 2018-19 on account of lower than estimated GST collection. Solutions • Budget has introduced speedy resolution of cases pertaining to direct taxes by introducing ‘Vivad Se Vishwas’ scheme under which will cover disputes related to Direct Taxes. This will help to strengthen “Tax Resolution Infrastructure” in the country. • Under this scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get a complete waiver of interest and penalty provided he pays by 31st March 2020. • It has also eased down various taxation complexities by providing numerous options such as concessional corporate tax rate of 15% to new domestic companies engaged in the generation of electricity, 100% tax exemption to interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors by the Sovereign Wealth Fund of foreign governments. • It has eased down paper work by allotment of PAN to be allotted online on the basis of Aadhaar details. It will enable to widen tax base. • PAN to be allotted online on the basis of Aadhaar details without any requirement of the detailed application. • The budget has proposed to abolish the Dividend Distribution Tax (DDT) and instead proposed and adopt the classical system of dividend taxation under which the companies would not be required to pay DDT. • The dividend shall be taxed only in the hands of the recipients at their applicable rate. • Option to be provided to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess, with no exemptions or deductions. • There have a lot of modifications to the simplification of paying GST