Union Budget: At the bottom of the page lie Nirmala's deficit secrets -Devadeep Purohit
Sitharaman spun a narrative, listed some intent but did little to give the economy a much-needed push
The nation had swooned over Narendra Modi’s Mazboot Bharat narrative in April-May, giving the BJP a thumping victory in the Lok Sabha polls. The success of the saffron camp in spinning narratives was in full display on Friday when Nirmala Sitharaman rose to present the Union budget 2019-20 that the ruling dispensation in Delhi termed #BudgetForNewIndia.
The finance minister took 127 minutes — the length of a standard Bollywood flick — to roll out a budget that Modi later described as “citizen-friendly, development-friendly and future-oriented”. In a televised address, the Prime Minister said the budget will “empower the poor and provide better future to the youth”.
After commending the budget, Sitharaman, as an afterthought, addressed the key question of any budget and let the world know that the government would cut its fiscal deficit target to 3.3 per cent of GDP in 2019-20 against 3.4 per cent estimated earlier.
This indeed came as a surprise as analysts were expecting the finance minister to retain the 3.4 per cent fiscal deficit target if not raise it further in view of the slowing down of the economy and poor revenue collection track record.
Fiscal deficit is the difference between the government’s revenue receipts plus non-debt capital receipts and the total expenditure and that’s why is reflective of the total borrowing requirements.
On Friday, Sitharaman’s fiscal deficit feat brought cheers in the bond markets and the impact was immediately felt with a reduction in yield on the 10-year G-Sec by 10 basis points.
However, a closer look at the budget documents brings the claim under stress. Global ratings agency Moody’s Investors Service flagged its concern with the number, but used a politically correct and milder expression. The goal of achieving a lower fiscal deficit, the agency said, looked challenging.
The reasons can be found in the budget document.
First, the fiscal deficit feat can be linked to a higher denominator that Sitharaman used while calculating fiscal deficit, which is expressed as a percentage of GDP.
A note at the bottom of the Budget at a Glance page, which is part of the budget documents, clearly mentions: “GDP for BE 2019-2020 has been projected at Rs 21100607 crore assuming 12 per cent growth over the estimated GDP of Rs 18840731 crore for 2018-2019 (RE).”
Please click here to read more.