Budget 2020: Laundry list of demands from various sectors of the economy

Given that there could be a tax revenue crunch next year, and the Centre is expected to maintain some fiscal discipline, the Modi govt may have to prioritise some sectors over others

Ten days from now, Finance Minister Nirmala Sitharaman will present what could well be the defining budget not only of the Modi government’s second term, but perhaps its entire tenure so far.

The economy slowed down to a 26-quarter low of 4.5 per cent in the July-September quarter, and the Reserve Bank of India sees 2019-20 gross domestic product to grow at just 5 per cent, down from its earlier estimates of 6.1 per cent. The International Monetary Fund, earlier this week, also slashed its forecast for India’s GDP growth from 6.1 per cent to 4.8 per cent, and said that the country would be a drag on the global economy.

The slowdown is deep and spread across sectors. While Sitharaman has made a number of sector-specific announcements and slashed corporate taxes, all of these have been aimed at the supply side. The centre expects a rebound in demand and consumption in the coming quarters. However, India Ratings, on Wednesday, forecast GDP growth for 2020-21 at 5.5 per cent, with significant downside risks.

Every industry, interest group and stakeholder has a laundry list of demands from Sitharaman and her budget team. However, given that there could still be a tax revenue crunch next year, and the centre is expected to maintain some sort of fiscal discipline, the Modi government may have to prioritise some sectors over others. Here are some of the demands: 

Agriculture and rural: It is largely accepted that while the demand and consumption have taken a hit in cities as well as villages, it is at its most entrenched in the latter. This time it is not only the agriculture representatives, but even industry bodies who have asked for measures which put more disposable income in the hands of the rural population. The two ways that the government can do that are under PM Kisan and NREGA. So it remains to be seen by how much allocations are increased under these two schemes. There have also been demands for further agriculture market reforms and giving greater market access to farmers.

Industry: In interactions with Sitharaman and Prime Minister Narendra Modi, the industry has asked for greater clarity on policy and improving of the regulatory environment to safeguard investments. The call to reduce uncertainty in policy matters comes after the recent Supreme Court judgements on pending adjusted gross revenue dues of the telecom industry, which has created a pall of uncertainty over the telecom sector. The industry has also asked for increasing export competitiveness and reviving private investment to kick-starting growth of economy.

Markets: The two biggest demands of the markets have been reduction or elimination of long-term capital gains tax on certain securities, and the shifting of dividend distribution tax on from companies to shareholders. Whether Sitharaman can do that or not will depend on the revenue department’s assessment of possible revenue foregone from these measures.

Economists: The most prominent recommendations from policy experts and economists has been that the centre should leave aside fiscal concerns and go for a spending stimulus to kick-start economic growth. However, as Business Standard has reported earlier, the top political leadership of the government is not in favour of an outright budgetary blowout and some discipline may be maintained. Also, economists have been demanding that the government should show a transparent picture of its fiscal situation and bring more credibility to official data.

Salaried class: After reduction in corporate taxes, the clamour has been for an income tax cut. However, it increasingly seems like while the Finance Minister will go for some rationalization of income tax slabs, an outright reduction in rates may not be possible, given the precarious tax revenue situation. Even rate rationalization will be done in a way as to not impact budgetary considerations.

Tech/start-ups: In their pre-budget meeting with the Finance Ministry officials, the representatives of fintech and start-ups shared their views and suggestions regarding big data, incentives for encouraging setting up of data centres, fiscal incentives for data localisation, incentives for pushing digital penetration in rural areas, corporate guarantee to start-ups for competing with other nations, rationalisation of minimum alternate rate, tax exemption for start-up units, creation of specific agency for looking after cross border financial crimes and othes.

Social sector: The requests the health, education, water and sanitation sectors include removing disparities in accessing sanitation and quality of water, scaling up rural sanitation and hygiene, decentralisation of waste management system, demand side management for water allocation, collectivisation of sanitation workers, incentivising waste water treatment and recycling, need for child budgeting,  a dedicated National Fund for protection of children, eradication of child labour, collecting gender disaggregated data by a National mission, broadening, expanding and strengthening PDS, land titles to women in view of increasing feminisation of agriculture, waiver of tax on assisted technology for disabled persons, better compliance of Right to Education and more financial allocation for secondary level schools.