Business Today 23-Feb-20

There is a reason why Piyush Goyal’s Interim Budget and Nirmala Sitharaman’s Budget 2019 failed to kick-start India’s growth engines – but Budget 2020 could. Goyal’s Interim Budget was tasked with winning the elections with sops to the poor and the farmers. It succeeded there but failed to revive the economy. Sitharaman’s first Budget, the Economic Survey and subsequent announcements idealistically pointed at China’s growth model and aimed at rekindling the “animal spirits” in the economy, cutting corporate taxes, consolidating banks, incentivising exports and real estate and injecting liquidity. But the assumption in both the Budgets that India’s slowdown was deepening due to failing investment cycle and lack of growth in exports was a woefully wrong diagnosis. India’s exports have been flat since 2013, and private investments have been slowing…

FMCG GROWTH DOWN TO SINGLE DIGITS FY19 was tough for FMCG. Growth in traditional trade, which forms a large part of FMCG sales, was much slower in the last quarter of FY19, due to shrinking consumption 90% Share of traditional trade in FMCG 2.6% Growth in FMCG consumption in Q4 FY19; much less than 12% in Q4 FY18 ₹41,279 CRORE Net FMCG sales in Q2FY20; 3.3% lower than in Q1 99% Fall in cottonseed oil production. Production of only two out of five dairy products (ghee and ice cream) has increased 4.28%  Per capita GDP growth in FY20, lower than the 5.53% in FY19. Private consumption has been a victim of falling per capita GDP, resulting in lower demand and production LESS TO SPEND At 7.4%, disposable income growth in…

₹ 2.34 LAKH CRORE The spike is mostly due to the largest project announced – Interglobe Aviation’s proposal to purchase 300 A320neo aircraft ₹ 26,000 CRORE The cost of the largest public sector project announced – the Andhra Pradesh government’s solar power project in Kurnool district ₹ 8.76 LAKH CRORE New projects announced in March 2010 quarter, the highest in 10 years TOO OPTIMISTIC According to the first advance estimates released by the Ministry of Statistics and Programme Implementation, GDP growth for FY20 is expected to be 5 per cent, the lowest in 11 years. And even to reach this level, the economy will have to grow at 5.2 per cent in the second half, as the first half saw growth of only 4.8 per cent. This is a tall…

On February 1, Finance Minister Nirmala Sitharaman made a Budget speech that will be remembered for its length and sobriety. It lasted for almost three hours – the longest in the history of Indian Parliament – and lacked the number games that are often associated with Budget announcements. No claims of astronomical increases in budgetary allocations, no unrealistic revenue projections. What the minister did was to present a string of measures that are expected to improve the financial health of agrarian and rural India, leave some money in hands of taxpaying citizens and improve investment opportunities for private enterprises, both foreign and domestic. The immediate response of stock markets – the BSE Sensex ended the day down by 988 points, the steepest Budget day fall in a decade - suggests…

CONSUMPTION BOOST Positives • New tax exemption system to leave more money in hands of taxpayers• Agricultural credit target of ₹15 lakh crore for 2020/21; PM-KISAN beneficiaries covered• Turnover threshold for audit of MSMEs increased• Enhanced social security through pension and insurance penetration Negatives • Doubling farmers' income is conditional to several measures to be adopted by states and the Centre. No short-term measures to increase farm incomes• Payment delays by troubled discoms can derail solar power generation-based income plan for farmers INVESTMENT PUSH Positives • No Dispute But Trust Scheme – ‘Vivad Se Vishwas’ Scheme – to unlock large amounts stuck in litigation• Tax concession for sovereign wealth fund of foreign governments and other foreign investments• A scheme to provide subordinate debt for MSME entrepreneurs• Concessional corporate tax rate…

Did you have any particular constituencies in mind while preparing the Budget? I don’t think I had any specific constituency in mind. I didn’t go through a sectoral approach where I have to do something for a sector or industry. We were looking at the economy at large and the macro-economic fundamentals being what they are, how are we going to move forward. What were the assumptions behind the ₹40,000 crore income tax revenue forgone? That’s based on an approximate calculation. You have a taxation regime with over 120 exemptions. I’m an honest taxpayer and want to pay tax. From the income I get after availing all exemptions available to me which is my right, I can pay this much tax. I pick up a few exemptions for which I…