Budget 2020 was disappointing for lacking vision, says Ashima Goyal

The Union Budget was “disappointing” as it lacked a vision, though measures like relaxing the fiscal deficit target and simplifying income tax are positives, the PM’s economic advisory council member Ashima Goyal has said.

Goyal, who is a part-time member of the Economic Advisory Council to the Prime Minister (EAC-PM), also said that it was a “surprise” not to have a mention of the word ‘slowdown’ in the nearly three-hour long speech by Finance Minister Nirmala Sitharaman.

The Budget document is a “balancing act” between fiscal stimulus to drive growth and the need to be responsible on spending, she said at the Indira Gandhi Institute for Development Research here over the weekend. “Overall it (Budget) was disappointing because they didn't bring out the vision as a first real budget of a new government. It had to give a vision,” she said.

India’s GDP growth is expected to slip to a decadal low of 5 per cent this fiscal, pressured by domestic factors like drop in consumption, as well as global issues.

She said Sitharaman was in a “catch-22” situation from the word go in the Budget making process, wherein any action would have left someone unhappy. However, the finance minister has achieved a “balancing act” through her moves, Goyal said. She elaborated that by adopting the ‘exit clause’ under the Fiscal Responsibility and Budget Management (FRBM) Act, the government gave a stimulus to growth and yet affirmed commitment to rules against fiscal profligacy.

To drive the point further, she said a 0.5 percentage point relaxation in fiscal deficit target offered under the exit clause makes lot of resources available, considering that the overall size of the economy is nearly $3 trillion.

Goyal also welcomed the government's resolve not to adopt policies similar to the response following the 2008 financial crisis.

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Caught in the midst of a lack-of-demand-driven slowdown, consumption stocks have had a bumpy ride thus far in calendar year 2020 (CY2020). In the run-up to the Union Budget for 2020-21, stocks such as Avenue Supermarts, Bharti Airtel, Crompton Greaves Consumer Electricals, Relaxo Footwears, Dabur, and Hindustan Unilever (HUL) rallied between 7 and 20 per cent on hopes of a stimulus package to spur demand.

However, as the Budget dashed hopes of any immediate consumption revival, stocks, including ITC, Page Industries, Marico, Zee Entertainment, and Britannia Industries corrected up to 14 per cent between February 1 and 12. ITC, in particular, lost heavily on the government’s proposal to levy National calamity contingent duty (NCCD) on cigarettes.

Still, the proposals intended to double the farmers’ income, liberalise the agriculture sector, and double the milk processing capacity (to address rural distress), and income tax slabs rejig in a bid to increase the disposable income, may revive the consumption in the medium-to-long term, say analysts.

Rural economy-led recovery

Despite the near-term headwinds, analysts remain positive on the sector. Changes in the personal income-tax, hope of good monsoon and the on-going above normal Rabi acreage along with higher minimum support prices (MSP) are the key triggers analysts are betting on for the consumption revival.

“To increase rural disposable income and consumption, the focus has been on horticulture, fisheries and animal husbandry; agriculture credit, warehousing; and easy credit facility and facilitating export. All these measures aim to increase the income realisation from agriculture and allied activities,” wrote analysts at CARE Ratings.

Yet, a meaningful pickup is far away considering slowdown in other leading macro indicators like vehicle sales, index of industrial production (IIP), increase in inflation.

“Overall, we expect GDP growth to slide further to 4.3 per cent y-o-y in Q4 (from 4.5 per cent in Q3), before staging a weak recovery to 4.5 per cent in Q1 2020 (lowered from 4.7 per cent earlier). India is not directly exposed to the COVID-19 outbreak, but we are concerned that there will likely be indirect spillovers due to weaker global demand. For 2020, we expect GDP growth to remain below trend at 5.4 per cent in 2020, only marginally higher than 4.9 per cent in 2019,” wrote Sonal Varma, managing director and chief India economist at Nomura in a co-authored report with Aurodeep Nandi.

Where to invest?

In this backdrop, Vinay Pandit, head of institutional equities at India Nivesh remains bullish on the consumer durables segment (Voltas), autos (two-wheelers like Hero MotoCorp). He advises investors allocate 40-50 per cent of their portfolio to mid and large-cap companies, while the remaining 50 per cent should be allocated to quality small-caps such as V Mart Retail, VST Tillers, Minda Corp, Blue Star, Astra Microwave, JB Chemicals and TVS Srichakra.

Shirish Jaisingh Pardeshi, an analyst tracing the FMCG sector at Centrum Broking is positive on Asian Paints, Berger Paints, and Britannia which, he says, hold structural changes in the consumption patterns.

Government’s focus on doubling farmer income is likely to benefit HUL, ITC, Dabur, Marico, Asian Paints, analysts say, while the reduction in personal income-tax could benefit Trent, Aditya Birla Fashion, Jubilant FoodWorks, and Titan. That apart, the custom duty hike in footwear will benefit Bata and Relaxo Footwears, they add.

Market Ahead, January 27: All you need to know before the Opening Bell

The Union Budget will be the top factor for the markets this week while the ongoing corporate results and global cues will also impact sentiment. The Indian stock markets will be open for normal trading on February 1, which is a Saturday, when Finance Minister Nirmala Sitharaman presents the Union Budget to the Parliament.

The key event of the week would be the Budget and the expectations are high this time as market participants pin hopes for additional measures from the government to revive the economy. According to analysts, this is likely to drive momentum in the markets in the coming sessions. The broader market has rallied in expectation of re-rating of valuations and it may continue to do so till the actual Budget announcement.

On the earnings front, investors will react to ICICI Bank's Q3 results on Monday. Around 400 companies will declare their quarterly earnings this week, which includes heavyweights like HDFC, Maruti Suzuki, SBI, ITC, HUL, IndiGo, and Tech Mahindra.

Meanwhile, the expiry of January series futures & options contracts is expected to inject further volatility in the markets. Traders will also track the impact of the coronavirus outbreak, which has killed 56 people in China and rattled investors globally.

Investors would also watch out for the US Fed and Bank of England's monetary policy this week. The US Fed interest rate decision is scheduled for Thursday. Also, the United Kingdom is set to exit the European Union by next week's January 31, 2020 deadline.

Shares slid on Monday as investors shunned equities on growing concerns over the scope of a China virus outbreak. US S&P 500 mini futures shed 1.2 per cent in early Asian trade. The Nikkei futures traded in Chicago suggested Japanese shares are on course for a steep 2 per cent decline. Even the SGX Nifty was trading with over 100 points cut, indicating a gap-down start for domestic indices today.

In commodities, oil prices slumped a further 2 per cent to multi-month lows on Monday as the rising number of cases of the new China virus deepened concerns about demand for crude. Brent crude fell by $1.12 a barrel to $59.57.

Back home, the Sensex closed 0.79 per cent lower last week while the Nifty ended with losses of 0.84 per cent.

Going forward, analysts say that the Nifty is witnessing strong support in the sub-12,200 zones. The market is likely to trade in range of 12,200 to 12,300 until 12,300 level is not breached and hence traders should try to buy at dips keeping close eye on 12,200 level. However, if the Nifty is able to breach level of 12300, it might lead to short covering move up to 12,350.

Economic survey to revenue receipts: FAQs about Union Budget 2019 answered

What is the Union Budget? When will Budget 2019 be presented? How is it prepared? Read to know all about the Union Budget of India.

While the formal printing of documents began on June 22 with the symbolic "halwa-making ceremony", the Union Budget 2019 will be presented on July 5. Finance Minister Nirmala Sitharaman has been seeking suggestions from industrialists and common man for the upcoming Budget. According to officials, the focus is clearly on reviving the economy and creating jobs.

Here's what you must know about Union Budget 2019

What is the Union Budget?

Union Budget of India is the country’s comprehensive Annual Financial Statement. It consists of details of the government's capital, revenue and expenditures. Article 112 of the constitution says, "the Union Government lays a statement of its estimated receipts and expenditure for that year, from April 1 to March 31, before both the Houses of Parliament.

The Budget, in a nutshell, is nothing but a statement of income and expenditure. Two important elements on both sides - income and expenditure - are Revenue Receipts and Revenue Expenditure.

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What date is the Budget 2019?

The Union Budget 2019 will be presented on July 5. In 2016, the government advanced the budget presentation to the first day of February, departing from the practice of presenting it on the last working day of the month, to give more time to departments to spend the money allocated to them. Sticking to the practice, this year the

Interim Budget was presented on February 1. The full-fledged Budget will, however, be announced in July 5.

Why Sitharaman's Budget 2019 is special?

Budget 2019 will be presented before the Parliament by Finance Minister Nirmala Sitharaman. The Interim Budget was tabled by Piyush Goyal on February 1. Breaching a largely male bastion, Sitharaman is the first woman in 48 years since then prime minister Indira Gandhi to hold charge of the key ministry.

Is railway Budget merged with general Budget?

Yes. Till 2016, the Union Railway Budget was presented separately a day before the Union Budget by the Railway Minister in the Parliament. Now, the Railway Budget will be announced by the Finance Minister along with the General Budget.

What was the Interim Budget 2019?

Former Union Finance Minister Piyush Goyal presented an Interim Budget for 2019 in Parliament on February 1. An Interim Budget usually doesn't list out new schemes or doesn't unveil any policy measures. Now that the Lok Sabha elections are through, the first full budget of Modi government 2.0 will be presented on July 5.

How is the Union Budget of India made?

The Union Budget is made through a consultative process involving ministry of finance, NITI Aayog and spending ministries. Finance ministry issues guidelines on the basis of which the ministries present their demands. The Budget Division of the Department of Economic Affairs in the finance ministry is the nodal body responsible for producing the Budget.

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How is the Budget prepared?

Preparing a Budget is extremely tedious and a lengthy process. It begins with the Budget Division issuing circular to all ministries, states, UTs, autonomous bodies, deparments and the defence forces, who are asked to submit expenditure estimates for the upcoming year. Extensive consultations are held between Union ministries and the Department of Expenditure of the finance ministry once the estimates have been submitted.

In the meantime, the Department of Economic Affairs (DEA) and Department of Revenue meet stakeholders such as farmers, businessmen, FIIs, economists and civil society groups to take their views. Once the pre-Budget meetings are over, a final call on the tax proposals is taken by the finance minister. The proposals are discussed with the Prime Minister before the Budget is finally prepared.

What does the Budget presentation speech comprise?

The Budget presentation speech comprises the following parts:

Annual Financial Statement (AFS)

Demand for Grants (DG)

Appropriation Bill

Finance Bill

Macro-economic framework for the relevant financial year

Medium-Term fiscal policy and a strategy statement

Expenditure Profile

Expenditure Budget

Receipts Budget

What are the three categories of Budget?

The Union Budget comprises Capital Budget, Revenue Budget, Expenditure Budget

Capital Budget

The Capital Budget part of the Union Budget has accounts for capital payment and receipts of the government. Capital receipts include: i) Loans from the public; ii) Loans from RBI

Capital receipts are loans raised by the government from the public (which are called market loans), borrowings by the government from the Reserve Bank of India and

other parties through sale of treasury bills, loans received from foreign bodies and governments, and recoveries of loans granted by the Central government to state and Union Territory governments and other parties.

Capital payments include expenses incurred towards building long term assets and facilities like land, buildings, machinery, etc.

Revenue Budget

The Revenue Budget records all the revenue receipts and expenditure. If the revenue expense is more than that of receipts, it indicates that there is a revenue deficit. Revenue expenditure is for the normal running of government departments and various services, interest payments on debt, subsidies, etc. Revenue receipts are divided into tax and non-tax revenue. Tax revenues are made up of taxes such as income tax, corporate tax, excise, customs and other duties that the government levies.

In non-tax revenue, the government's sources are interest on loans and dividend on investments like PSUs, fees, and other receipts for services that it renders.

Expenditure Budget

The expenditure budget refers to the estimated expenditure of the government during a given financial year. It shows the capital and revenue disbursements of various ministries/departments and presents it under 'Plan' and Non Plan'. Expenditure Budget provides analysis of various types of expenditure. Demand for grants of the Central government is also a part of the Expenditure Budget.

FinMin asks citizens to submit suggestions on Budget 2019 by June 20

The government on Friday sought inputs from citizens on the Union Budget 2019-20 with a view to make the Budget making exercise more participative and inclusive.

The comments have been sought on government's 'mygov.in' portal by June 20.

Finance Minister Nirmala Sitharaman will present the first budget of the Modi 2.0 government on July 5.

In order to make the Union Budget-making process participative and inclusive, the ministry of finance seeks inputs from citizens and this has been a practice for the last several years. This year too, the ministry looks forward to hearing suggestions for the Union Budget which will be presented in Parliament in the upcoming session, the portal said while inviting ideas and suggestions for Union Budget 2019-2020.

"Citizens from all walks of life are welcome to be a part of this democratic exercise. You can submit your suggestions either directly in the comments box or attach a PDF document. We seek your valuable ideas to continue the tradition of the Union Budget incorporating the citizens' aspirations," it said.

Sitharaman had on Thursday appreciated the suggestions given by various stakeholders for the forthcoming budget and said that ministry officials will take note of them.

Her budget team comprises Minister of State for Finance Anurag Singh Thakur and Chief Economic Advisor Krishnamurthy Subramanian. The official team is led by Finance Secretary Subhash Chandra Garg, Expenditure Secretary Girish Chandra Murmu, Revenue Secretary Ajay Bhushan Pandey, DIPAM Secretary Atanu Chakraborty, and Financial Services Secretary Rajiv Kumar.

In her budget, the 59-year-old JNU alumnus, Sitharaman, will have to address slowing economy, financial sector troubles like rising NPAs and liquidity crisis in NBFCs, job creation, private investments, exports revival, agrarian crisis and raise public investment without compromising on fiscal prudence.

The first session of the newly elected 17th Lok Sabha will be held from June 17 to July 26. The Economic Survey for 2019-20 will be tabled on July 4 followed by the presentation of the budget on the next day.