Mixed Signals Fail To Boost Confidence

Union Budget 2020-21 provides conflicting signals about country’s economic future; new tax regime rolled out

- Aparajita Gupta

Every year the Union Budget comes with a lot of hopes for people cutting across social spectrum. But this year’s budget has significantly failed to gain the confidence of the people at a time when the economy is already going through a slump. Despite its attempt to boost the spirit, few convincing announcements to revive the economy, unfortunately dampened the spirit of the citizens.

Certainly Budget FY21 was not a transformational one, but it has the undertone to revive the health of the economy. The more than two-and-a-half-hour-long budget speech by Finance Minister, Nirmala Sitharaman made the Sensex fall by 1,000 points causing investors lose ₹3.5 lakh crore.

The overarching takeaways from the budget were income tax sops given to the middle class and several projects targeted at reviving farm sector of the country. At the very outset, the finance minister said, “This is the budget to boost their incomes and enhance their purchasing power. Only through higher growth we can achieve that and have our youth gainfully and meaningfully employed.”

To balance the ongoing slump in the economy, Sitharaman revised the fiscal deficit at 3.8 per cent in FY20 from 3.3 per cent earlier. And set the same at 3.5 per cent for FY21.Both mid-year reduction of corporate tax and dwindling Goods and Services Tax (GST) collections coupled with economic slowdown made the government overshoot its fiscal deficit target. Net market borrowings for FY20 would be ₹4.99 lakh crore and for FY21 it would be ₹5.36 lakh crore.