FM ignores Inflation figures, puts growth in peril

Allocations made in Budget 2020 were in abundance in sectors like agriculture, rural development, skill development, infrastructure and many others, but after adjustments with inflation figures, the picture doesn’t seem to be very bright.

Hyderabad: Presenting her second Budget, Union Finance Minister Nirmala Sitharaman has identified growth areas that will help in achieving a five trillion-dollar economy, yet when it comes to allocation, it seems she grew a cold foot.

Allocations were in abundance in sectors like agriculture, rural development, skill development, infrastructure and many others, but after adjustments with inflation figures, the picture doesn’t seem to be very bright.

The Union Budget 2020-21 has three major themes -- Aspirational India, Economic Development and Caring Society. In total, Rs 7.82 lakh crore were allocated to these three focus areas for the next financial year.

Sector Name	Budget Estimates 2019-20 (In Rs. Crore)	Budget Estimates 2020-21 (In Rs. Crore)	Hike in Allocations (In Rs. Crore)
Aspirational India	4,67,517	4,82,401	14,884‬
Economic Development	2,23,695	2,37,604	13,909‬
Caring Society	59,036	62,626	3,590‬
Total	7,50,248‬	7,82,631‬	32,383

In comparison to the budgetary allocation of Rs 7,50,248 in 2019-20, this would be Rs 32,383 crore or 4.31% higher. But when adjusted to inflation (rise in prices), this allocation seems meagre.

Inflation projections

Five days after presentation of the Budget, the Reserve Bank of India (RBI) has projected more than 5% inflation in April-September 2020 period and 3.2% price rise in Oct-Dec 2020.

Going by the “surprise” inflation in the current financial year, the RBI Governor Shaktikanta Das has cautioned that there would be pressure on inflation numbers from pulses, pharmaceuticals, phone charges etc. in the coming months.

It should be noted that RBI’s mandate is to maintain consumer inflation at an optimum level of 4% and within the upper limit of 6%.

In December, the Consumer Price Index breached the RBI’s upper threshold and touched 7.35% on the back of high food prices, especially onion.

Going by the RBI’s projections, the average inflation during 2020-21 is expected to be around 4%.

Adjusted to inflation, the allocations in the Budget for the three identified sectors is a hike of a mere 0.31 per cent.

Within Aspirational India, there are three sub-heads (i) Agriculture & Allied, Irrigation & Rural Development (ii) Wellness, water, sanitation (iii) Education & Skill Development.

Sub-Head	BE 2019-20 (In Rs. Crore)	BE 2020-21 (In Rs. Crore)
Agriculture & Allied, Irrigation & Rural Development	2,76,380	2,83,202
Wellness, water, sanitation	93,294	96,885
Education & Skill Development	97,843	1,02,314
Total	4,67,517	4,82,401

Out of the total allocation of Rs 4,82, 401 crore for Aspirational India, Agriculture & Allied, Irrigation & Rural Development got the lion share of Rs 2,83,202 crore.

Given the fact that more than 50% of the country’s population is dependent on the agriculture sector, there has been a criticism that allocations are not sufficient.

When ETV BHARAT sought the Finance Minister’s comments on this, she said Agriculture has been accorded high priority in the Budget and 16 action points have been proposed for its development.

No doubt, agriculture and rural development received highest allocations compared to any other sector. But, adjusted to inflation, the hike is just Rs 4,000 crore for the whole year.

Similarly, the Department of Agriculture, Cooperation and Farmers’ Welfare received 3% more allocations in the Budget compared to the budgetary allocations in 2019-20. In effect, adjusted to inflation, allocations are less compared to the current year.

Reports suggested that the current economic slowdown is primarily due to the weak rural demand and economists were expecting big push in the MGNREGA Scheme, which has every potential to trigger rural household wealth.

To their dismay, MGNREGA has received Rs 61,500 crore compared to Rs 60,000 crore in the 2019-20 Budget. And when compared to the Revised Estimates of Rs 71,002 crore for 2019-20, the allocation for 2020-21 would eventually slide down and settle at Rs 8,502 crore less.

From the Opposition to economists, the only question staring at the government at this hour is, without any real spending, can the limping economy be stabilised? This question remains unanswered, at least for now.

(Writing by Shravan Kumar, Editing by Dipankar Bose)