THE GIST of Editorial for UPSC Exams : 03 February 2020 (Falling short of aspirations (The Hindu))

Falling short of aspirations (The Hindu)

Mains Paper 3: Economy
Prelims level: Not much
Mains level: Rural development allocation

Context:

There were many expectations from the Union Budget 2020: that it would reverse the falling growth rate, reduce unemployment and rekindle the animal spirits needed to revive private investment.

Skill development allocation:

The Finance Minister has allocated a paltry ₹3,000 crore for skill development. Skilling will require massive investment and concerted efforts.
The Budget could have given tax incentives to companies to provide internships and on-site vocational training to unemployed youth. The country cannot afford to let the world’s largest workforce waste this way.
The government remains very determined to present itself as being fiscally prudent. Total expenditure is slated to go up marginally to 13.5% GDP from 13.2% of GDP for the current fiscal (revised estimates).
The fiscal deficit is pegged at 3.5% of GDP. Going by the experience with the current fiscal, the deficit level is not paramount concern for the market.
Due to the ‘slippage in tax collections this fiscal year combined with stepped up government expenditure, market borrowings by the government have gone up as much as 15%’.
Still, yields on government securities have not gone up significantly. Neither inflation nor the current account deficit have set alarm bells ringing, as feared by the government.

On flagship welfare schemes:

The Budget falls well short of expectations when it comes to boosting demand. Budgetary allocations for the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are disappointing.
The MGNREGA is allocated ..............................................

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Improving transport infrastructure:

The allocation of ₹1.7 lakh crore for transportation infrastructure is also a welcome step. But a lot will depend on whether the money actually gets invested or remains unspent as it has happened in the current fiscal year.
If the public investment infrastructure actually materialises, it will lend credence to the government’s stated commitment to revive the investment cycle — to spur job-creating growth.
To pull in private investment, the public funding should be front-loaded in under-implementation projects. Small irrigation and rural road projects are also relatively easy to complete and deliver immense benefits to several sectors.

Getting private investment:

The Budget’s main growth plank is the hope for a deluge of private infrastructure investment through public-private partnership (PPP) and external sovereign wealth funds that have been given 100% tax exceptions in the Budget.
But private investment depends on the cost of capital along with the certainty of returns.
Many projects have been mired in contractual disputes with government departments and various regulatory hurdles.
All these factors make infrastructure investment unnecessarily risky and render these projects unattractive for investors.

Bonds and startups:

The fundamental problem of infrastructure finance is the asset-liability mismatch which can be addressed only by developing a vibrant ‘corporate bond market.
However, the focus of the ..............................................

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Trade Receivables Discounting System:

Another welcome feature is the scheme to allow the non-banking financial companies into the Trade Receivables Discounting System (TReDS).
An ecosystem that aims to facilitate the financing and settling of trade-related transactions of small entities with corporate and other buyers, including government departments and public sector undertakings.
To reduce the compliance burden on small retailers, traders and shopkeepers who comprise the Small and Medium-sized Enterprises (SMEs) sector, the threshold for audit of the accounts has been increased from ₹1 crore to ₹5 crore for those entities that carry out less than 5% of their business transactions in cash.
It is also good that the Finance Minister has extended the window for restructuring of loans for micro, small and medium-sized enterprises till March 31, 2021.

Way ahead:

However, for many products produced by these enterprises, the tax rates are higher for inputs than the final goods.
In addition, many SMEs ....................................

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Conclusion:

Everything considered, the future of the economy will turn on whether the government walks the talk in terms of public investment and the promises made to different sections of society including the taxpayer and companies.
When it comes to reviving private sentiments, actions will speak much louder than the budgetary promises.
Click here to Join IAS PRE Online Course

General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1) With reference to the 'Investment Clearance Cell', consider the following statements:
1. The Union Finance Minister proposed setting up of an Investment Clearance Cell for young entrepreneurs.
2. It will provide “end to end” facilitation and support to create more opportunities to youth and remove roadblocks.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) 1 and 2 only
(d) None