What impact would fiscal expenditures of Rs. 33.5 lakh crore for 2020-21 have on growth, redistribution and delivery of public services?

Budget 2020-21

Will It Stimulate Growth, Improve Redistribution &

Deliver Public Services Better?

SUBHASH CHANDRA GARG

SUMMARY VERSION

At its core, budget making is an exercise in making an assessment of the taxes and debt which the Government of India can raise, maintaining macro-economic stability, to fund an expenditure programme, based on policy preferences of the Government, to stimulate growth, to deliver a redistribution programme for poor and needy and to provide public goods and services.

The expenditure proposals should lead to determination, design and scale of financing needed for appropriate expenditure programme for (i) stimulating growth in the economy, (ii) delivering a programme to pull-out poor people out of poverty and hunger and to provide a suitable scale and mode of assistance to the people who are unable to earn their living for reasons of illness, old age, physical handicap or any other socio-physical reason like uneducated widows and (iii) undertaking public goods and services, as contrasted from private goods and services, which the Government only can provide like law and order, maintaining monetary stability, regulation and delivery of environmental services like control of pollution.

Total Expenditures 2020-21

Budgeted Expenditures

Budgeted expenditure for 2020-21 is Rs. 30.42 Crore, which is Rs. 3.4 lakh Crore or 12.8% higher over the RE 2019-20. Budgeted expenditures of Rs. 16.03 lakh Crore (52.69%) are not discretionary (Establishment, Interest, GST compensation and Finance Commission Transfers), effectively not much in control of the Central Government. The remaining budgeted expenditure of Rs. 14.39 lakh Crore (Central Sector Schemes, Centrally Sponsored Schemes, Other Central Expenditures and Other Transfers) actually represent expenditures where the Central Government has the choice to undertake such expenditure or not to do so and also to decide its scale. 

Off-Budget Expenditures

Total Off-Budget and Outside the Budget expenditures of the Government for 2020-21, adding expenditure through NSSF loans of Rs. 73147 Crore, funded through Fully Service Bonds (FSBs) of Rs.49500 Crore and met by deducting investments from expenditures (‘Outside the Budget and Fiscal Deficit’) of Rs. 10000 Crore, are Rs. 1,32,647 Crore. This amount is lower than Rs. 2,19,034 Crore of the off-budget financing in 2019-20RE.

Other Fiscal Expenditures Outside the Budget (Additional Off-Budget)

Capital expenditure/ losses of the non-commercial entities like Food Corporation of India, Railways and now NHAI are, in its true nature, fiscal expenditures. While I don’t think entire Public Sector Borrowing Requirement (PSBR) should be treated as fiscal deficit, expenditure supported by the borrowings of/ liability undertaken by non-commercial entities of Air India Asset Holding, BSNL and MTNL, FCI’s borrowings other than NSSF and Cash Credit, Railways and NHAI should be treated as Government expenditures. Such expenditures aggregate to Rs. 2,43,948 Crore in 2019-20 and Rs. 1,78,121 Crore in 2020-21.

Total Government Expenditure in 2020-21   

Total expenditures estimated to be incurred by the Government, counting all the budgeted, off-budget, including below the line expenditure and expenditure of non-commercial public enterprises and entities of the Government is Rs. 31,61,534 Crore (31.62 lakh Crore) for the year 2019-20 BE and Rs. 33,52,998 Crore (33.53 lakh Crore) for the year 2020-21. This amounts to 15.5% and 14.97% of the estimated GDP of Rs. 204 lakh Crore and Rs. 224 lakh Crore respectively.

With income of the Government, both revenue and capital receipts, amounting to Rs. 22,45,893 Crore, the real fiscal deficit for 2020-21 is Rs. 11,07,105 Crore or 4.94% of estimated GDP of Rs. 224 lakh Crore for 2020-21.

Almost entire off-budget and public enterprises/ entities expenditure is discretionary in nature with Government being in a position to control these expenditures. With the budgeted non-discretionary expenditure of the Government for the financial year 2020-21 being Rs. 16.03 lakh Crore, total discretionary expenditure is estimated at Rs. 17.5 lakh Crore or 7.81% of GDP.

Expenditures for Stimulating Growth

Total growth-oriented expenditure of the Central Government for 2020-21, taking all the five major heads of infrastructure, agriculture promotion, industries and services provision, investment in equity of public enterprises and development of backward and rural areas of the country, is Rs. 6.06 lakh Crore, which is approximately 35% of the entire discretionary expenditure of Rs. 17.5 lakh Crore for 2020-21.

Infrastructure

Central Government’s total estimated expenditure on infrastructure adds up to Rs. 3,63,000 Crore (Roads Rs. 1,46,975 Crore, Railways Rs. 1,60,792 Crore, Metros and NCR Sub-urban Rs. 19,571 Crore and Rs. 22050 Crore Lumpsum for Infrastructure Pipeline, rest Other Smaller Infrastructure expenditure) or say Rs. 3.63 lakh Crore, which forms a hefty 20.7% of the total discretionary expenditure of Rs. 17.5 lakh Crore. A striking feature of the Central Government’s infrastructure expenditure is the preponderance of expenditure on physical transport infrastructure. Budget proposals for infrastructure are unlikely to provide any notable stimulation for growth.

First of all, there is no increase in these expenditures, even on nominal terms, in 2020-21 over BE 2019-20. Railways capital expenditures were budgeted at Rs. 1.60 lakh Crore in 2019-20. In 2020-21, these expenditures are budgeted at Rs. 1.61 lakh Crore, almost static. NHAI’s internal and extra budgetary capital expenditures were budgeted at Rs. 75000 Crore in 2019-20. In 2020-21, these have been scaled down to Rs. 65,000 Crore, a reduction of Rs. 10000 Crore or over 15%. There is an increase from Rs. 36,691 Crore to Rs. 42,500 Crore in NHAI’s budgeted expenditures, which does not compensate for the lesser IEBR. Together, NHAI’s capital expenditure will come down from Rs. 1,11,691 Crore budgeted in 2019-20 to Rs. 1,07,500 Crore, a net reduction of about Rs. 4, 200 Crore. Non-NHAI roadworks expenditure are slated to moderately go up from Rs. 45, 880 Crore in BE 2019-20 to Rs. 48,759 Crore in BE 2020-21. All-together, the capital expenditure on road works are also almost static, seeing no growth even in nominal terms. Expenditure on Metro projects is also quite static in nominal terms falling from Rs. 17,714 Crore in BE 2019-20 to Rs. 17,482 Crore in BE 2020-21.

Second, productivity of these expenditures is quite low as it takes very long to even complete these projects. There is nothing in the budget proposals to suggest that this state of affairs is going to improve. Despite spending so much on railways infrastructure (over Rs. 1.5 lakh Crore a year), the railways are not able to complete projects as there are at least ten/fifteen times larger unfinished projects. Major freight infrastructure projects like Delhi-Mumbai Industrial Corridor and Eastern Freight are limping along for years. Railways have doggedly refused to privatise its infrastructure operations. Consequently, there is no real investment in railways infrastructure by either foreign or domestic investors.

The private sector is practically absent from investing in road infrastructure presently though not long ago, the private sector used to invest quite substantially in road sector. However, policies followed with respect to land acquisition, including its pricing, has made the private sector run away from road infrastructure sector. India has enormous need of quality and better service road infrastructure. We have not even scratched the surface of the expressways’ construction we need in the country for faster movement of goods and people. Last mile infrastructure connectivity also remains quite chaotic still.

Central Government takes a minority (20%) stake in metro construction SPV and provides small subordinate loan. As no metro has become profitable, the equity investment made has not yielded a single rupee of financial return.

Third, there are no definite proposals and allocations for the troubled infrastructure sectors of the economy. Real estate, especially residential real estate sector is suffering its worst slump- new projects are not being launched; older projects under construction for quite some years now are stalled. This sector is extremely important from employment (surplus agriculture labour gets absorbed in construction work) and spin off impact on several industries (cement, steel etc.). The Budget does not have a single proposal for addressing the residential real estate sector. There is no specific provision for even Rs. 10,000 Crore to be provided to the Real Estate AIF announced by the Government (that proposal is still-borne in my understanding as it was designed to provide more debt to already overleveraged entities).

Road sector is the infrastructure sector which had played very supportive role in generating economic growth during 2015-2019 albeit using unsustainable financing models. This sector can get revived only after the issues pertaining to its excessive cost of construction is addressed. Private sector would come only after that. There is no likelihood of private sector showing any interest in making investment in road projects as the Budget has no such reform proposal. As noted above, the public sector investment, through NHAI and other Government outfits, for the year 2020-21 is at a slightly lower level, even in nominal terms. As a good part of the borrowing is now required to be used for servicing debt already accumulated by NHAI, it is quite likely that actual central government expenditure on roads in 2020-21 will be about 25% less than in 2019-20.

There are no proposals in the Budget for other struggling infrastructure sectors- like telecommunications and power either. For power, there is only an announcement regarding smart metering being pushed. The fundamental problem of the power sector is the gap between cost of power to the state distribution companies and the revenues they collect. The gap is too large- over Rs. 2 lakh crore a year. This gap has emasculated state government finances as they provide over a lakh crore of subsidies every year. This gap is responsible for the distribution companies not paying to the power generators regularly (large outstanding of over 80,000 Crore have accumulated on this account). Smart metering addresses a small part of the gap. For smart metering also there is no additional provision in the Budget.

Agriculture

The Government of India runs dozens of agriculture and food security related programmes with an approximate budgeted outlay of Rs. 3,50,000 Crore. In addition, food subsidy expenditure of Rs. 68,200 Crore and irrigation works of Rs. 5000 Crore are proposed to be provided funds through NSSF. Total expenditure on agriculture related programme comes to roughly Rs. 4.23 lakh Crore. This forms 24.3% of the total discretionary expenditure of the Government of India.

A large part of this expenditure, including Rs. 75,000 Crore of PM-Kisan and Rs. 1,83,770 Crore of food subsidy totalling to Rs. 3.29 lakh Crore are essentially of redistribution nature. Remaining expenditure of Rs. 94000 Crore (including fertiliser subsidy) is intended to be of growth stimulating nature. This expenditure is incurred through numerous (exceeding 50) production and productivity enhancing programmes, which are largely inputs (seed, fertiliser, loan, insurance, pesticides etc.) driven programmes. There is no change in these programmes for the year 2020-21.

Almost all of these agriculture growth stimulating programmes were designed in 1970s and 1980s (these have been re-packaged with different names over last fifty years) to popularise use of agriculture inputs and training and visit technologies of green revolution era. This job of popularising these inputs is over long back. In fact, there is now problem of over-use of many inputs, for example of nitrogenous fertiliser- urea. There is really no impact on agriculture productivity and production increase of these programmes now.

The budget proposals for agriculture are also unlikely to make any difference to stimulate growth of agriculture in Indian economy.

Promotion of Industries and Services

The Central Government undertakes over 100 different programmes to promote industry and business. Over 75 of these have budget provision exceeding Rs. 100 Crore for FY 2020-21. These programmes target a large spectrum of industries and services. The estimated cost of the programme costing Rs. 100 Crore or more for FY 2020-21 works out to approximately Rs. 55,000 Crore or 3.2% of total discretionary spend of the Government of India. These outlays have not seen any notable increase in 2020-21 over 2019-20.

Most of these programmes focus on some kind of subsidisation to small businesses and exporters for reducing cost of debt and to incentivise employment. Indian industry faces triple cost dis-advantage- interest, tax and power tariff. Interest rates have to fall in general. Some minor interest cost subsidisation is neither efficient not very well administrable. Tax regime for service enterprises and existing manufacturing industries continue to be disadvantageous though for new manufacturing the tax regime has been made comparable to the best. More value added (in excess of 60%) comes from services. There is no attempt to provide power to industries at competitive rates.

There does not appear to be any strategy to pick up the horse(s) which could be the growth engines of future. There are a few programmes to support sun-rise sectors like start-ups but these are too small and too few. There is recognition that services enterprises will be champions of future. There are small allocations (usually token Rs. 5 Crore) in several Ministries, which seem more of a lip service than a real effort to provide a launching pad for champion services.

Investment in public enterprises

The equity investments proposed in Budget 2020-21 add up to a little more than Rs. 45000 Crore or 2.57% of total discretionary expenditure. Loans of Rs. 3237 Crore are also proposed to be given to Nuclear Power Corporation from Budget.

Notable feature of equity investment proposals in public enterprises is that financial enterprises of the Government (IIFCL, EXIM Bank, Insurance Companies), sick services enterprises (BSNL and MTNL) and assistance disbursing organisations like SC, ST corporation now dominate as recipients of equity investments from Government. More than Rs. 23500 Crore have been proposed to be invested in the equity of public sector financial enterprises. The Government has invested over Rs. 2,50,000 Crore in the equity of PSBs in last three years.

All the financial enterprises of the Government, be it Banks, General Insurance Companies, Infrastructure financing bodies like IIFCL, export promoting organisations like EXIM Bank are performing relatively quiet poorly. Sinking such enormous equity in these financial companies, which are increasingly losing share of the market and are not able to compete with private enterprises, amounts to throwing good money after bad. This also reflects the preference of the Government to continue to retain these financial enterprises in the public sector at whatever it costs.

Government’s proposal to provide equity funding to BSNL and MTNL to pay for the cost of 4G licence is another instance of debasement of equity as a risk capital investment. There is no likelihood of BSNL and MTNL to add any significant number of customers, add value and make any profits. This equity will go down under without it ever coming back to the Government. It makes no sense for BSNL and MTNL to go for 4G licence and create a network at this stage in a super competitive field.

It is time, the Government expeditiously exits completely from the areas where the private sector has acquired more than 75% market share (airline, telecom), plan a phased out exit (may be spread over next 5-7 years) in businesses where private sector has reached or steadily moving towards crossing 50% market share (general insurance, Banks) and stop investing fresh capital in any such enterprise.

The budget proposals of investing Rs. 45000 Crore in the equity of these enterprises are unlikely to give any noteworthy boost to the growth potential.

Backward and Rural Area Development Expenditure

Development of road, telecom and other infrastructure in rural areas and other economically and socially backward regions of the country promotes growth of the economy besides providing impetus to human and social development. A number of programmes have been taken up by the Central Government, mostly as Centrally Sponsored Schemes, to achieve this objective. Expenditure provision for these programmes for 2020-21 is Rs. 48,677 Crore or 2.68%.  

While there is not much increase in outlays of these programme, these programmes have played enormously positive role in generating growth impulses. These investments have enabled rural population to be more literate, connected and productive. These have also helped in improving labour mobility and opened up some diversification of labour from agriculture.

These programmes would continue to play its positive role in generating growth stimuli, but its impact is unlikely to be any dramatic. Moreover, as the reach of most of these programmes saturate (100% toilets constructed, 100% houses electrified and so on), their positive impact on the margin will get increasingly smaller.

Budget Expenditures for achieving Redistribution

A larger part of the discretionary expenditure is of redistributional nature. The Government reaches several sections of society- old, infirm and handicapped who are not in a position to earn their livelihood, economically weaker sections like farmers and labour, socially weaker sections like SCs, STs and OBCs and other support deserving sections of society like poor, student etc.

These supports are delivered through either the Centrally Sponsored Schemes (CSS) or the Central Sector Schemes. There are several dozens of such Schemes. An attempt is made to organise the outlays of these numerous schemes using the objectives of such schemes.

The re-distributional programmes targeted at people unable to earn their livelihood, labour and farmers and also those aimed at building human capital and providing means for improving the incomes of the poor described above alone are estimated to cost the Government approximately Rs. 6.20 lakh Crore in 2020-21. This is more than 1/3^rd of total discretionary expenditure of the Government (17.5 lakh Crore).

The Government did well to avoid the temptation of going for any consumption stimulus programme. The state of public finances is quite tight. With real fiscal deficit touching 5% of GDP, the Government would have found it difficult to sustain any stimulus. An additional stimulus of 1% of GDP, over the estimated headline fiscal deficit of 3.5% would have massively disrupted the bond markets and would have possibly unleased an inflationary cycle, which is quite fragile in Indian context. Temporary disruption in vegetables supply in last three-four months has led to retail inflation touching 8% in December 2019.

Old, infirm and other Incapacitated people

The largest programme of the Central Government to help old, infirm, physically handicapped people and divorcee women without the capacity to earn living is the National Social Assistance Programme (NSAP) which has an outlay of Rs. 9197 Crore for the year 2020-21. There is another small scheme- Annadata Aay Sanrakshan- meant to provide cereals to the indigent in emergent situation has an outlay of Rs. 500 Crore.

The Department of Financial Services runs a Scheme- Interest Subsidy to LIC for Pension Plan for Senior Citizens- with an outlay of Rs. 115 Crore for FY 2020-21. Another scheme is Pradhan Mantri Vay Vandan Yojna with an outlay of Rs. 180 Crore. The Freedom Fighters (pension and other benefits) scheme with an outlay of Rs. 775 Crore also virtually falls in this category.

Together, the pure transfers for the people who are not in a position to earn their livelihood for physical reasons and are entirely dependent on state support is around Rs. 10, 767 Crore. The assistance under these schemes are usually supplemented by the State Governments from their budget. These schemes serve the poorest of the poor and the citizens in real need. There has been talk of increasing scale of assistance under these schemes for quite some time. While that has not happened, the continuance of these schemes is the minimum the Government could have done.

Farmers

Bulk of redistributional budget is directed towards farmers.

Most of the agriculture programme expenditure is of redistributional nature. Rs. 75000 Crore provided under the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) is direct cash transfer to farmers. Food subsidy expenditure of Rs. 1,83,770 Crore is also essentially meant to provide farmers good returns for their produce and are fiscal transfers to them, although a good part of these subsidies is lost on account of inefficiency of the system of procurement and that of FCI. Another Rs. 200 Crore have been provided for under Farmers’ Pension scheme. In all, fiscal expenditures of about Rs. 3.30 lakh Crore are meant to be fiscal transfers to the farmers.

The PM-Kisan programme was initiated in the FY 2018-19 to address acute farmers’ distress, caused by severe fall in the prices of most agriculture commodities leading to farmers’ incomes declining substantially. This cannot be a permanent programme and should continue only as long as the farm prices remain depressed. In the current year 2019-20, the prices of agriculture commodities have risen well. Given the state of production of agriculture commodities, the trend of strengthening agriculture prices is likely to continue in the FY 2020-21. The Government can develop an index of farmers’ distress based on agriculture prices and production loss. If the Index is not in the depression zone in the previous year, the PM-Kisan should not be operationalised. There is good reason to discontinue PM-Kisan from the second half of 2020-21.

The largest redistribution programme is food-subsidy programme. The programme is implemented through a very convoluted system of essentially cereals- wheat and rice- procurement through the system of above the market, ironically called, minimum support prices (MSPs), managed through an inefficient and costly system run by Food Corporation of India (FCI) almost doubling the prices paid to farmers by incurring excessive cost of procurement, storage and transportation. Farmers’ gains are very limited (only to wheat and rice farmers of select states that too at best the difference between internal prices and what the farmers get as MSP). Total value of wheat and rice produced in the country in 2018-19 was approximately Rs. 4.75 lakh Crore. Food subsidy cost at Rs. 1.83 lakh Crore was as high as 40% of the value of total crop of wheat and rice. There is no point in managing cereals economy in this wasteful manner. A much better system would be to give farmers’ a certain direct cash transfer with the choice to grow whatever crop they wish to grow. Vulnerable sections of people can be given food coupons which they can use to buy cereals of their choice or any other food supplements out of the list of permissible food items, if the Government still wishes to ensure that this support should only be spent on food consumption.

In agriculture, the expenditure programmes of the Government for farmers’ welfare are quite dysfunctional and not delivering any real value for the expenditures being incurred. Agriculture in India needs diversification, better consumer-oriented produce and packaging, market orientation, displacement of excessively large labour from agriculture to non-agriculture work and better and sustainable use of natural and manmade inputs.

There is also need for supporting farmers to come out of poverty and move into newer occupations. A fundamental shift is needed in agriculture policies and development programme. A programme of direct transfer to farmers will serve these objectives better.

Labour

A large number of central programmes are targeted at providing employment and ameliorating the condition of labour. The expenditure budgeted for these programmes add up to minimum Rs. 70,406 Crore. Most prominent programme is Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) which has an outlay of Rs. 61,500 Crore.

The largest programme for transferring fiscal resources to labour is the MGNREGA programme with an outlay of Rs. 61500 Crore. This programme serves a very useful purpose- providing a minimum wage work when there is no other work available. This is not intended to be an asset construction programme. Asset construction is incidental. The programme should also be totally demand driven. Amongst other programmes, the largest is Government contribution to the National Pension Scheme. The Government is also building programme to inculcate long term saving practices in the informal sector- PM Shram Yogi Mandhan is intended for the same. The contributions made by the Government in these pension programme serves very useful purpose, which is not, for obvious reasons, going to have any short-term impact on impacting economic slowdown.

Human capital expenditure

Numerous programmes, health, education, literacy, skills, women empowerment and touching other aspects of human capital are funded by the Government. A list of 25 major programme run by the Government, which has an outlay of Rs. 1,51,204 Crore for FY 2020-21. While there is no appreciable increase in outlay of these schemes, their continuance is quite welcome to provide a minimum standard of health, education and skills improvement programme. It would be much better if some of these programme, specially skills development programme, can actually be more market aligned.

Poor and other vulnerable sections

The Government runs quite a few programmes targeted at poverty elimination. There are at least 14 major poverty alleviation programmes with an outlay of Rs. 65465 Crore in the Budget 2020-21.

These programmes are fairly well-designed and quite well implemented. Health, education, livelihood mission and the like programmes are serving quite useful purpose. Their implementation has got better in last few years. The outlays provided for these programmes for 2020-21 are more or less at the same levels as 2019-20. The Government has not proposed to scale these up for pushing any extra consumption demand.

Budget Expenditures for delivering Public Services

It is quite difficult in the first instance to compile the discretionary Central Government expenditure on delivery of ‘public goods and services’- the goods and services which satisfy the classical definition of public good i.e. goods which are non-excludible and non-rivalrous. 

However, when you scrutinise the major heads of discretionary expenditures, other than growth stimulating or transfers, like the expenditure on defence, scientific research etc. one comes across a number of expenditures which are of public goods and services.

Such discretionary expenditures of public goods nature for 2020-21 exceed Rs. 2,50,000 Crore. In addition, a good part of the establishment expenditure, like on salaries of defence personnel, is also meant for delivering public goods.

There is really no significant proposal in the budget to introduce supply of any new public goods and services or scale up notably any existing public service or discontinue any existing service. There is great need to expand public expenditure on environmental clean-up. Cities need to be cleaned up of pollution. Rivers need to be cleaned up. Yet, there is no new proposal in the Budget to expand these public expenditures. The Budget 2020-21 is effectively continuation of the programmes and policies of previous years in this respect- stability but no new push for expanding expenditures on public goods and services.

CONCLUSION

In this kind of unique exercise ever attempted of the nature and objective of the Central Government expenditure- broadly classified into growth stimulating expenditures, redistribution/ transfer expenditures and public goods expenditures, it transpires that, of about 17.5 lakh Crore of discretionary expenditure (other than establishment, interest, GST compensation transfer and Finance Commission mandated transfers), the Central Government is budgeting Rs. 6.06 lakh Crore of expenditure on major growth promoting programmes (infrastructure, industries, agriculture, investment in public enterprises and area development programmes), Rs. 6.20 lakh Crore on major redistributional/ transfers (incapacitated people, farmers, labour, human capital development and poor/ other vulnerable people) and Rs. 2.50 lakh Crore on ‘public goods’. This accounts for 14.76 lakh Crore of the Rs. 17.50 lakh Crore of discretionary expenditure of the Central Government. The rest of discretionary expenditure is budgeted for transfers to the States for their share of externally aided projects, investments in international institutions, grants to various kinds of institutions, petroleum products subsidies, minor programmes for growth and redistribution and other miscellaneous expenditures.

2020-21 would be the second year of the Government. First two years are extremely important to initiate programme of policy reforms and expenditure reforms for any Government. Budgets are the vehicles to signal those reforms and undertake those expenditure corrections. The Budget 2020-21 was particularly most important in the context of the Government’s announced ambition of making India a $10 trillion economy by early 2030s and $5 trillion economy by 2024-25. This was also quite significant in the given context of serious slowdown in the economy witnessed in the FY 2019-20.

In the broadest sense, the expenditure proposals of Budget 2020-21 present more of consolidation and continuation of budgetary outlays in the face of deteriorating economic and fiscal situation. It is heartening to note that a number of well-implemented public welfare programmes like rural roads, rural housing, toilets, household electricity connections, household LPG connections and now tap water are continuing with their much-needed outlays protected. Distress relieving programme like MGNREGA and PM-Kisan are also continuing with their outlays preserved.

The objective of kick-starting growth and building growth momentum does not seem to have been addressed effectively in the Budget. Investments in roads, railways and metros have been the major planks of infrastructure investment by the Government. The outlays of these programmes have not seen any nominal growth in 2020-21 (in real terms, the provisions are actually 8-10% lower). Likewise, outlays for promoting industrial and services growth have seen no change in character or quantum. The old subsidisation programmes, largely aimed at MSMEs and exports, (these programmes are not enough to even neutralise the cost disadvantage, which Indian industry and services suffer on account of tax, interest and power cost disadvantages), continue as before. Major equity investments in public sector entities continue, with the equity flows now going into financial sector enterprises and sick enterprises. All these expenditures are unlikely to be imparting any fresh growth stimulus to the Indian economy.

A large chunk of redistribution expenditures is directed towards farmers. Farming is the weakest business these days, most particularly for the small and marginal farmers, which form more than 90% of the farming community. The support to the farmers is, however, delivered through a web of poorly designed and very inefficiently implemented programmes. Almost nothing of over 3.4 lakh crore of such expenditures in the name of farmers actually reaches the farmers. There is an urgent need for transforming the entire bouquet of these programmes. This can be done by converting these expenditures into direct cash transfers to the farmers. The Budget 2020-21, however, gives a pass to this extremely important agenda.

SUBHASH CHANDRA GARG

NEW DELHI 17/02/2020

(in case interested in details of how various numbers have been arrived at, see my blog https://subhashchandragarg.blogspot.com/2020/02/will-expenditure-proposals-of-budget.html?spref=tw)