Long thread on Indian Budget 2020-21. Let’s be cynical for a change & question the rationale of initiatives. Because I can’t understand some things the way they are. I’m sure however that we as a nation do believe in good luck. Else we seem to be cruising without compass. 
If you couldn’t understand why we needed 2.5 hours speech to convey this budget, you’re not alone. To simplify, GDP = Consumption + Investment + Govt spends + (Exports – Imports).We need all cylinders to fire, for #India with highest working age population in the world.Let's see
Basics first:
On a Rs 30.4 lac cr budget, govt will earn 74% & borrow rest 26%. Of this, 23% will be spent on interest payments. On balance 77%, Defense takes 11%, police forces 4%, subsidies 7%, Railways 7%, tax administration 5%, pensions 7%.
On a Rs 30.4 lac cr budget, govt will earn 74% & borrow rest 26%. Of this, 23% will be spent on interest payments. On balance 77%, Defense takes 11%, police forces 4%, subsidies 7%, Railways 7%, tax administration 5%, pensions 7%.
Agriculture + rural development take 10% of spends. Education 3% & health 2% indicate how crunched we are vs populist policies. For the youth who still awaits new govt sector vacancies, read the budget carefully to know that sarkari jobs will shrink going forward.
We simply don’t have the money to afford more government. Confront this fact rather than living in false hope. Politics aside, no party, repeat- no party can change this reality. There is simply no money. Govt is not selling #LIC without a reason.
Secondly, don’t pay any attention to the budgetary allocation numbers to various schemes & sectors. This is more of the same. In the above split, there is hardly much any FM can do. It is the same percentage every year, almost.
So nobody gives you the percentage of spends as it looks routine. Allocation in crores makes you think this is fresh money. It’s not. And regardless of allocation, 86% of everything will go into administration & revenue expenses.
So 90% of education spend goes for salaries & so is the case with other allocations. We’re not building any assets with 86% of budget money. With this, lets understand the cynicism, which I’m sure many share with me. Some in a bit softer voice, but still.
Consumption:
We all need more disposable money in hand to spend, aside of the confidence that we’ll retain our jobs in an economy that’ll grow with predictable pace. We moved from 4 tax slabs to 11 & 2 options, with or without exemptions. So much for simplifying taxes.
We all need more disposable money in hand to spend, aside of the confidence that we’ll retain our jobs in an economy that’ll grow with predictable pace. We moved from 4 tax slabs to 11 & 2 options, with or without exemptions. So much for simplifying taxes.
Youth doesn’t need to invest on 80C / housing loan etc going forward. Good for consumption today? May be for some. Un-predictable outlook for many others who till last year bought all instruments for exemptions. What stops a govt starting exemptions again after 5 yrs ?
Investments:
Infrastructure investments of 100 lac cr over 5 years. Budget doesn’t allocate even 10% of this. Where are the projects,plans & funds? Expecting sovereign funds to invest in Indian infra sector where domestic banks are afraid of lending money? Good luck with that !
Infrastructure investments of 100 lac cr over 5 years. Budget doesn’t allocate even 10% of this. Where are the projects,plans & funds? Expecting sovereign funds to invest in Indian infra sector where domestic banks are afraid of lending money? Good luck with that !
Real estate is crying for reforms. They don’t need budgetary support but a policy push with state govts. And a promise that it govts will not use builders to fund elections. Can any state rise to show how its done ? Not yet & I'm not surprised.
And when people stop buying houses, it’s not because millennials don’t like home ownership. It’s because their home doesn’t get beyond incomplete concrete structure. Credit revival dreams without real estate growth. May be more luck can help.
5% TDS on tour operators booking travels outside India. Govt couldn’t track the foreign travelers for taxes by other means. Innovation in wrong places? Operators will start bifurcating expenses in different pockets with while paying tax on minor service charge heads.
Talk of encouraging business practices with dubious accounts, we know best how to kill an industry. Also, we’ll now pay 5% on all remittances outside India. So fully taxed income is taxed additional 5% as it moves abroad. And we ask why is rupee losing value ?
Government:
One investment that seems well laid out is the political capital. Agriculture, irrigation, farmers income, rural development, rural internet, water, sanitation, fertilizers, food subsidy & child welfare, we heard all. Isn’t this all talking about the same people ?
One investment that seems well laid out is the political capital. Agriculture, irrigation, farmers income, rural development, rural internet, water, sanitation, fertilizers, food subsidy & child welfare, we heard all. Isn’t this all talking about the same people ?
Why does our budget always have to talk about SC/ST, women child & farmers separately? As if all of them have different needs. Does food safety, sanitation, child nutrition, clean water & air specific to farmers only? Why does everything has to be under a “scheme”?
We have Rs 4.55 lac crores allocated to farmers under 6 different schemes. Food, fertilizer, agriculture, rural & social add up to Rs 50,000 per household of spends (9 cr households).
Current farmer’s GDP per household is much lesser than this amount. Won’t it be better if we just transfer this 50K to every household every year? Do we need schemes that diminish incomes to less than the spends on those plans?
00 smart cities was last I heard & 5 more now. Will someone pls define a smart city for me? And one fine day we hear that city X is the new smart one. What does smart look like? Development can wait but pls don’t dilute the benchmarks. Why do we need 105 cities to be smart?
Why not plan for just 4 smart cities, but when you say smart, they better look like Singapore. Good luck is in place, I guess. May be, a bit more than that. Waiting for the first one still. (And yes that includes Indore also, please). What do these announcements even mean ?
Finally, all we need from our govt is the following: A rule of law, contract enforcement, speedy justice, minimal business obstacles, property protection, clean water, air, roads, power, primary education & healthcare.
Instead, what we get is outlay on a maze of 116 central schemes & even more at state levels. And with an efficiency that takes more money to work than the income levels it is expected to generate for people.
I would like to see a day when we just see 6 to 7 heads of allocation in the budget, each addressing one key element of govt delivery. Probably unlikely as long as budget is seen more like a political event. Its certainly is not much of an economic event now.
Well, we certainly need good luck with what seems like “maximum government & minimum governance” ! #Budget #BudgetSession2020 #LIC #NirmalaSitaraman #incometaxslab
Pls do see my take on budget on Quint bit.ly/37Mh8ku
