Dream Budget Speech for 2020
We often hear that honesty is the best policy. Gandhi was trying to take us in that direction. Indian economy was struggling at a snail’s pace since independence. Whether the Nehruvian model of the economy was good or bad is debatable; that the Indira model of “license-quota-permit raj” was atrocious cannot be argued. It took an economic crisis & the combination of Rao-Manmohan to bring India out from a socialistic economy to a market form of economy & gave Indians above 5% growth rate. The combination of Vajpayee-Yashwant (Vajpayee openly accepted Rao as his guru) not only continued the good work but built upon it by pushing infrastructure growth. We actually had, “Achche din”. Sonia-Manmohan took India back to Indira’s socialistic model (the Left was part of UPA-1). Coupled with corruption & inaction things got worse. In 2014 India looked with hope towards Modi to improve things. He had also made big promises. We had not visualised the impact of Modi’s policies of economic-incompetence, denial of truth, lies, opacity in policy making, arrogance & a totally confrontationist approach towards governance (any expression of difference of opinion from Modi is treated as anti-national by Modi & his bought media) will have on the economy. If these policies were not thrust upon India, then we would have had a growth of about 8-10% over 6 years, unemployment would have been below 3% & India would not just be the fastest growing economy but would today be attracting massive FDI & realising the demographic dividend & heading towards over 10% growth. In this blog it has been explained as to what could have been happening & what is happening today.
Dream Budget (What Should Have Happened?)
Modi, surprised every one by getting Raghuram Rajan (strong Modi critic) as the FM (drawing comparisons with Nehru for moral courage and acceptance of difference of opinion). In the shortest budget speech ever (30 min) Rajan explained the economic situation & plans to improve it with greater clarity than ever done in Indian history. This is what the FM stated in the budget speech on 01 Feb 2020:
- India is facing a grave economic crisis.
- Unemployment problem is acute.
- The crisis is a result of the bad policies followed so far & the solution is through structural changes & will take 2-3 years to resolve.
- The fiscal deficit for 2019-20 was 5 % of GDP & the proposed fiscal deficit for 2020-21 is also 5 % of GDP.
- The GDP is expected to pick up to 6% by the end of the financial year & to 7 % next year. The government was willing to accept retail inflation of around 5-6% as it was inevitable considering the high fiscal deficit.
- The primary engine for Indian growth is domestic & rural demand (approximately 58% impact). To increase this demand, we have allocated:
- Rs 2.5 lac crore for rural infrastructure development to ensure completion of projects within this financial year only.
- Rs 1.5 lac crore for MNREGA.
- Rs 2 lac for PM Kisan Yojana.
- To promote growth through the next important engine of growth, private investment (approximately 30%) the government will invite foreign investment and provide them tax benefits. Reduction in corporate tax has already been done & nothing further will be done.
- To promote growth and increase employment through public expenditure (approximately 13-15%) refer to the point made above about Rs 2.5 lac crore.
- Agriculture. The government is incapable of doubling the farmers’ income not only by 2022 or even by 2030. The government does not intend to do so either. The government has proposed to clear production of all GM crops, removal of all import-export bans on agriculture and dairy products. Allocation of PM Kisan Yojana is given above.
- To boost exports (CAD is approximately 1.5% of GDP) it is proposed to give up the protectionist policies, liberalise trade & join RCEP on favourable terms in this year. The CAD is expected to come below 1% this year.
- Structural Reforms. The government proposed to effect land and labour reforms in this year by bringing fresh legislation.
- Banking Sector. Proposed plans to bring NPAs down to Rs 2 lac crore in this year.
- Disinvestment. Proposed plans to disinvest Rs 1 lac crore in the year.
- No other policy changes were proposed in the budget.
- Raised the budget allocation of education and health care to 1 lac crore each.
After 30 min of Rajan’s Speech Modi Makes Following Statements
Modi spoke only for 2 min, praised the ladies protesting at Shaheen Bagh & announced proposal to terminate CAA-NRC & the following other points:
- Government will work in the true spirit of cooperative federalism.
- Cut the expenditure of ministries and parliament to Rs 400 crore. He explained that just like in the corporate when a business does not do well, the major business managers take a salary cut & since government has let down the people the PM and the parliamentarians will take this cut.
- Proposed the end of the electoral bonds policy.
- Proposed strengthening of the RTI.
- Praised Kejriwal’s efforts to improve the state of education & health in Delhi. Invited him to guide the central government in framing the centre’s education & health policies in the spirit of cooperative federalism and national interest. The entire Parliament shouted, “Jai Hind & long live PM Modi!”
What has Actually Happened?
The result of the Modi economic model was the budget presentation of 160 min which we heard.
The visualised budget speech by Rajan would have made the SENSEX go up by 1000 points. Actually, it came down by 1000 points. Modi would have remained PM for life & India would move on a path to progress. All protests would have ended & people would have got back to work. About Kashmir & Assam we will talk another time.