New Delhi, Feb 1 (IANS) The Centre intends to take the emergency escape clause in its fiscal consolidation doctrine to boost growth even as slowdown cripples finances and hurts market sentiment, proposed Finance Minister Nirmala Sitharman in her Budget speech on Saturday.
The move assumes significance as GST collections have fallen short than earlier projections. At the same time, the government undertook massive corporate tax cut to boost investments and employment opportunities.
Economy watchers have blamed high GST tax rates, stagnant wages, subdued investment and distress in rural sector along with low job creation as the key reasons for the slowdown that has dampened consumer sentiment.
“Section 4 (2) of the Fiscal Responsibility and Budget Management (FRBM) Act provides for a trigger mechanism for a deviation from the estimated fiscal deficit on account of structural reforms in the economy with unanticipated fiscal implications,” Sitharaman said while presenting the Union Budget 2020-21 to Parliament.
“Therefore, I have taken a deviation of 0.5 per cent, consistent with Section 4(3) of FRBM Act, both for RE 2019-20 and BE 2020-21.”
Recently, government undertook significant tax reforms for boosting investments. However, tax buoyancy is expected to take time.
Consequently, the estimated fiscal deficit for RE 2019-20 has been pegged at 3.8 per cent, while for BE 2020-21 it has been targeted at 3.5 per cent.
“This estimation is consistent with government’s abiding commitment to macroeconomic stability. It comprises 3.3 per cent for year 2019-20, and 3 per cent for the 2020-21 budget estimate.”
“This fiscal path commits us to the path of fiscal consolidation without compromising the needs of investment out of public funds.”
Accordingly, net market borrowings for the year 2019-20 would be Rs 4.99 lakh crore and for the year 2020-21, it would be Rs 5.36 lakh crore.
“A good part of the borrowings for the financial year 2020-21 would go towards Capital expenditure of the government that has been scaled up by more than 21 per cent.”.
“As I had previously mentioned, another about Rs 22,000 crore have been allocated for equity to fund certain specified infrastructure finance companies, who would leverage it manifold and provide much needed long-term finance to infrastructure sector. That should spur growth impulses in the economy.”
Latest data released on Friday showed that India’s budgetary fiscal deficit for the April-December period was Rs 9.31 lakh crore, or 132.4 per cent of the budget estimates (BE).
The government had targeted fiscal deficit to be at Rs 7.03 lakh crore for 2019-20.
As per Controller General of Accounts (CGA) data, the fiscal deficit during the corresponding months of the previous fiscal was 112.4 per cent of that year’s target.
The Central government’s total expenditure stood at Rs 21.09 lakh crore (75.7 per cent of BE) while total receipts were Rs 11.77 lakh crore (56.6 per cent of BE).
–IANS
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