Budget 2020 - The Make Or Break Budget

No one is expecting Nirmala Sitharaman to swing a magic wand on February 1, but it is imperative that her budget shows a way out of the economic slowdown

- K. Sunil Thomas

In a new year message to his employees a week ago, industrialist Kumar Mangalam Birla spoke at length about how India and the world were facing thte after-effects of what he called ‘slowbalisation’. “This new world,” he said, “is not for the faint-hearted.”

Finance Minister Nirmala Sitharaman by no means is faint-hearted. Anyone who has seen her working would agree that the lady means business, even though she goes about it rather grumpy faced. But faint-hearted? No, sire.

Yet, when Sitharaman gets up to present the Union budget on February 1, it will put to test every bit of her resolve. For this is no ordinary budget. At no point since Manmohan Singh, as P.V. Narasimha Rao’s finance minister, set in motion India’s liberalisation story in 1991 has the annual event assumed such significance. At stake is not just the future of India’s fortunes, but also the political legacy of Prime Minister Narendra Modi.

Till about three years ago, India was the world’s fastest-growing major economy. Then everything went awry. As non-performing assets piled up, banks and the financial system came under immense stress. In them, non-banking financial companies (NBFCs) that lend to small businesses and consumers, in turn, faced a shortage of cash, percolating the woe down the value chain. Modi’s demonetisation of high-value currency notes in 2016 remains an unmitigated disaster, particularly for small businesses and farmers. Spending by rural population, already plagued by bad crops and falling prices, plummeted. Rule changes like the Real Estate Regulation Act (RERA) and Goods and Services Tax (GST), aimed at structurally cleaning up and simplifying the system, led to transitional pangs, further compounding the problem.