New Delhi: Ahead of the first budget to be presented by the new Narendra Modi-led government on July 5, the finance ministry has been awaiting recommendations of the two newly-constituted Cabinet committees on growth and unemployment.
Suggestions of these two panels is bound to have an impact on the allocation of funds and budgetary sops since the Modi 2.0 Cabinet looks to immediately address the pressing concerns of joblessness and a sluggish economy.
“The panel recommendations will guide some of the budget announcements to boost growth and generate employment and these issues will have to be tackled immediately. They cannot wait till the announcement of the next budget,” said an official of the finance ministry, who did not wish to be named.
The committees, constituted only last week and headed by Prime Minister Modi, are yet to meet. With representation from different ministries, both panels are expected to suggest comprehensive solutions encompassing their sectors, added the official.
The formation of the two new panels — Cabinet Committee on Investment and Growth and Cabinet Committee on Employment and Skill Development — speaks volumes about the massive challenge being faced by the government in its second tenure.
Also read: This is how Modi govt managed to keep 2018-19 fiscal deficit ‘artificially low’
Economy on downward slide
The Indian economy has slowed down to a five-year low of 5.8 per cent in the quarter that ended in March. The annual GDP figure also fell to 6.8 per cent in 2018-19, which is the second consecutive year of a sluggish economy under the Modi government.
This downhill of Indian economy has been led by both a sharp fall in investments and consumption, especially rural consumption. It is especially reflected in the decline of auto sales and fast-moving consumer goods (FMCG). The slowdown is expected to continue in the first half of the current fiscal despite three consecutive rate cut of 25 basis points by the Reserve Bank of India in the past four months.
Slipping unemployment rate
No relief seems in sight on the employment front as well, as the government’s quarterly survey shows that urban unemployment rate, especially among the youth, is on the rise in 2018-19.
Days after the 2019 Lok Sabha Election results were announced, a report released by the Centre had revealed that joblessness in the country stood at 6.1 per cent of the total labour force in 2017-18, the highest in 45 years. This data only went on to confirm the leaked National Sample Survey Office (NSSO) report in January this year, which the government was accused of covering up.
Budget preparations are expected to start in earnest on Monday after Finance Minister Nirmala Sitharaman’s return from the G20 meet in Japan, the official said. She will face the challenge of finding resources to fund growth-push while staying within the budgeted fiscal deficit target of 3.4 per cent for 2019-20.
The slow economic growth has also adversely impacted tax collections and may limit the scope of any further tax rate cuts to boost consumption and disposable incomes. Tax departments have suggested that the high targets set in the interim budget may be difficult to attain in the backdrop of a downhill economy.
Also read: To fix the economy, Modi govt needs to first get its basics right