Indian Economic Future: 2020

Indian Economic Future: 2020

I have quite regularly been writing on India’s economy. Post the presentation of the Union Budget I have been sharing my views on it as it is a good time to take stock of the state of the economy. In this blog I have shared my views on India’s economic future to include the essence of the previous budget, the latest economic survey and the proposals in the budget 2020-21.

Relevant Background Knowledge to Understanding Economic Future

  • In Modi government the FM means nothing. All government policies are Modi’s policies & reflect his personality. Sitharaman need not be praised or blamed for the good or the bad. It is solely Modi’s show.
  • Modi’s prime focus is elections. Hence vote bank politics and not economic sense influence economic decisions.
  • Modi has little respect for advice of economists or intellectuals because he feels that he understands political-economics better than anyone else. This is quite true because no PM, other than Modi, could have come to power with a greater majority after a huge blunder like demonetisation, probably anywhere in the world.
  • Selling falsehoods, making meaningless false promises and big propaganda statements are defining Modi traits and are apparent in his PM’s tenure. Another important trait is not to talk about what happened to the past promises but start making fresh false promises. Some salient past such trash promises or vision statements, related to the economy, are:
    • Rs 15 lac in every person’s account.
    • Elimination of black money.
    • Doubling farmer’s income by 2022. This nonsensical falsehood was repeated in this budget speech.
    • Make India a manufacturing hub through “Make in India”. Now a fresh “jumla” has been added, “Assemble in India” in this budget.
    • Make India a 5 trillion economy by 2024. This nonsensical falsehood was also repeated in this budget speech.
    • There was once some trash talk of 100 smart cities. In this budget there was talk of 5 more smart cities. No journalist, opposition or anyone else has the energy to ask as to what happened to the 100 smart cities? Do we already have them?

Major Contributors to India’s GDP

  • Domestic consumption: Approximately 55 to 60% contribution.
  • Private investment: Approximately 30 to 35% contribution.
  • Public expenditure: Approximately 12 to 15% contribution.
  • Exports: Since India has a Current Account Deficit, that is imports are more than exports the impact is approximately – (1.5 to 2.5) %.

Budget 2019-20 Estimates versus Reality

Budget Estimates

  • Expenditure: The government proposes to spend Rs 27,86,349 crore in 2019-20, which is 13.4% above the revised estimate of 2018-19.
  • Receipts: The receipts (other than net borrowings) are expected to increase by 14.2% to Rs 20,82,589 crore, owing to higher estimated revenue from corporation tax and dividends.
  • GDP growth: The government has assumed a nominal GDP growth rate of 12% (i.e., real growth plus inflation) in 2019-20.  The nominal growth estimate for 2018-19 was 11.5%.
  • Deficits: Revenue deficit is targeted at 2.3% of GDP, which is higher than the revised estimate of 2.2% in 2018-19.  Fiscal deficit is targeted at 3.3% of GDP, lower than the revised estimate of 3.4% in 2018-19. 

Actual Receipts

India’s government total revenue receipt was Rs 11.78 lac crore from April-December 2019. We make an optimistic assessment of revenue from Jan-Mar 2020 to be Rs 3 lac crore.  The total revenue would come to Rs 15.78 lac crore. This makes a shortfall of (20.82-14.78) = 6.04 lac crore from the estimates. This will obviously imply the fiscal deficit being more than the estimate.

Policy Decisions Rolled back

Within 3-4 months of the announcements the major policy decisions announced by the FM were rolled back creating uncertainty.

Major policy decision of 2019 aimed at increasing investment was reduction in the corporate tax which caused a loss of tax revenue of over Rs 1.5 lac crore and did not improve investments, employment or growth.

Major Economic Challenges to be Overcome Today

  • Growth revival, as GDP is down to 5% and is at a 6-year low.
  •  Unemployment rate increased to 7.7 per cent in Dec 2019. The situation is the worst in 45 years.
  • Increasing domestic consumption.
  • Increasing private investment.

Major Sensible Suggestions to Improve Economy by Prominent Economists

  • To Increase Domestic Consumption
    • Increase money in the hands of the rural population by increasing budget for MNREGA.
    • Increase in support prices of crops.
    • Increasing allocation of PM Kisan Yojana.
  • Increase public expenditure on rural roads and rural infrastructure.
  • Improve education and health care.

Highlights of Economic Survey 2020-21

  • GDP growth estimated at 6 to 6.5%.
  • Claimed 2.62 crore jobs were created in India during 2011-12 to 2017-18.
  • Suggested China-model for jobs:
    • Specialization at large scale in labour-intensive sectors, especially network products.
    • Laser-like focus on enabling assembling operations at mammoth scale in network products.
    • Export primarily to markets in rich countries.
    • Trade policy must be an enabler.
  • Survey says India has unprecedented opportunity to chart a China-like, labour-intensive, export trajectory. By integrating “Assemble in India for the world” into Make in India, India can raise its export market share to about 3.5 % by 2025 and 6 % by 2030. It felt that India can create 4 crore well-paid jobs by 2025 and 8 crore by 2030.
  • Survey shows clearly that sectors that were liberalized grew significantly faster than those that remain closed.
  • Government interventions often lead to unintended consequences such as price increases, compared to markets that are unregulated.
  • Promoting pro-business policies critical for India to become a $5 trillion economy by 2025 (revised from 2024!).
  • Pro-crony policies erode wealth & destroy value in the economy.
  • Forex reserve estimated at $ 461.2 billion in 2019-20
  • India’s balance of payments position improves, as current account deficit declines further.
  •  Foreign exchange reserves continue to be comfortable
  •  FDI inflows and overseas remittances are on an upward graph.


  • The suggestions are sensible but the figures cannot be believed and should not be believed.
  • Talked about some “Thalinomics”. This is absolute trash. To someone who may be asked a question about it the answer is that the survey is trying to tell that the food inflation has remained in control under Modi’s overall misrule. This was a fact till 2019. Now food inflation is rising so “Thalinomics” will also go for a six.

Highlights of Budget 2020-21

Good Points

  • Plans to invest in infrastructure are always very good. Some announcements, (very difficult to realize) are:
    • Aviation: Creation of 100 new airports.
    • Roads:
      • Monetisation of at least 12 lots of highway bundles of over 6000 km before 2024.
      • Development of 2500 km access control highways, 9000 km of economic corridors, 2000 km of coastal and land port roads and 2000 km of strategic highways.
    • Railways: The announcement of redevelopment of 4 railway stations and operation of 150 passenger trains through PPP model is a good idea.
  • FM announced increase in the turnover limits for start-ups to Rs. 100 crore from Rs. 25 crore and provide relief on the tax burden on employees eligible for employee stock options (ESOPs).
  • Plan to disinvest LIC. This is a good step. The biggest insurance company’s accounts will come under public scrutiny.
  • The FM proposed to hike the bank deposit insurance in scheduled commercial banks to Rs 5 lakh per depositor from the current Rs 1 lakh. This will give little more assurance to depositors. It would have been better to increase the amount in proportion to the deposited amount as is logical. Anyway, logic & Modi do not have much correlation!
  • Removal of anti-dumping duty on Purified terephthalic acid (PTA) is a good step. It is an essential raw material in manufacture of synthetic yarn. This should greatly help the cost competitiveness of the textile industry which has been suffering & has immense growth & employment potential.
  • Disinvestment plans are good. The targeted realisation of over Rs 2 lac crore is absolutely unrealistic.
  • The tax changes announced include plans to grant a tax exemption to sovereign wealth funds in respect of their interest, dividend and capital gains income from investments made in infrastructure in India before the 31 March 2024. The exemption will only apply if the investment is held for at least three years.

 Bad Points of Budget

  • Crisis. No acceptance that India is facing an economic crisis. Modi’s policy of the denial of the truth continues. As per Modi the slowdown is cyclical; the slowdown was caused by the world economy being bad; we have reached the bottom & now things will be good again. This is all false. India is in an economic crisis & it is caused primarily by Modi’s misrule.
  • No Plans for GDP Growth. No credible plans to improve consumption, private investment, education or health-care. In short, continuance of business as usual ignoring the advice of prominent economists.
  • Trash Announcements. Continuation of Modi’s policy of announcing plans with no credible financial backing.
  • Income Tax. This part of the budget I found most interesting. It is my conjecture that the evil genius who guided Modi’s plan to devise a complex GST to create havoc for the corporate, particularly small businessmen, was again Modi’s adviser on creating this complex personal IT policy. It gives options to people to opt for deductions or not. I have given the link for readers to understand the details. The details which I have understood are:
    • It creates stupid complexities.
    • CAs will benefit but tax payers will not.

Major Lies in the Budget

  • Belief that the economy has bottomed out and GDP will start rising. This is a lie. We need structural reforms to improve the GDP. Thus, GDP may go down further.
  • GDP growth figures of 10% nominal growth, estimates of revenue & expenditure are lies as they were in the previous budget.
  • Doubling of farmers’ income by 2022 & 5 trillion economy are of course lies.
  • Comments on the Lies. Coming from a person who can say with a straight face that his government never talked about NRC & that there are no detention camps in India, these are acceptable lies.

Interesting Observation

  • I wish the FM had announced some cuts on the expenditures of ministries and MPs. An increase in the allocation has been made.
  • The cost of Modi’s aircraft is likely to be above Rs 18200 crore.
  • The budget for ministries and parliamentarians has been increased to Rs 766 crore from about Rs 450 crore last year.
  • The allocation of MGNREGA has been reduced by Rs 9,500 crores from its revised estimate of 2019-20. The revised estimate of MGNREGA in 2019-20 was Rs 71,000 crore, and the budget estimate of MGNREGA for 2020-21 as announced in the Union Budget today stood at Rs 61,500 crore.

Why Economic Situation Will Worsen

  • No admission by the government that there is an economic crisis.
  • No plan to increase money in the hands of the poor and thus improve consumption.
  • Weak plans to increase employment. The infrastructure plans do not have adequate backing of funds.


Modi knows that he is incapable of improving India’s economy. He also knows that the fraud and highly centralised, so called Gujarat model of development is hollow and cannot work at India level. The only model for sustenance in power is Hindu radicalisation, creation of enemies and attacking them. Thus, India should be prepared for:

  • Worsening of the economy.
  • Continuation of protests.
  • Greater divisiveness and violence by Hindu radicals and criminal use of Police by a government which is less akin to a government and more like a mafia gang (just analyse the actions of UP Police in Bijnor and Muzaffarnagar).

Hindutva will rise & economy will deteriorate!


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  1. You are absolutely right in your assessment of Narendra Modi’s Economic performance and the data that’s doctored.
    CAG said a few months back that the Fiscal Deficit is at somewhere around 5% plus; the borrowings that the Gove makes are out of Budget and even plays on the PSU also.
    Indirect Taxes: The Indirect Tax collections of the low because of both the badly designed model of GST and Prime Minister’s hurry in implementation as more than anything else he wanted to do Midnight Tryst with the GST.
    It would have been better to pilot the GST using some products and in an area where there is better infrastructure on the ground to test it deal with bugs and learn lessons and extended to the entire country only after that and that too in phases.
    I am sure you are aware of the kind of havoc Australia faced despite it had 5% GST across the board and with no exemption; it is also much smaller in terms of population and much more uniform with better education and better IT infrastructure; the country was on the verge of going back to earlier ways when the situation started improving.
    Malaysia reverted to earlier ways.
    India has 6 to 8 different rates and many exemptions and it doesn’t cover all the products.
    Lesser said the better regarding Demonetisation which the outcome of whims of Prime Minister.
    This Govt is so short of capable human resources who can foot the bills in different ministries but he can’t work with the capable people from outside of BJP; the only kind of Rajiv Kumar NITI Dy Chairman can work with him.
    In 2019 when Nirmala Sitarman was kicked upstairs, Ashok K Banerjee of Business Standard while praising Piyush Goel to be assigned Ministry of Commerce said, “Nirmala Sitaraman is too conservative to be able to do any harm in the Finance Ministry. She had to walk back on all the declarations that Prime Minister got her to bring in the Budget in July 2019; we need to where she is going to eat a crow now.
    Please look at her IT Exemptions; she has made the alternate option more complex and confusing instead of making the things simpler.
    I am not sure whether these are the doings of S Gurumurthy who on behalf of RSS directs PM to do it and he, in turn, kicks the can to Nirmala Sitaraman.

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