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COVID-19 impact: Budget 2020 already falling apart, says Subhash Garg

With the COVID-19 impact grounding India’s disinvestment programme and the non-tax revenues declining, Budget 2020 is already falling apart, said Garg

  • The government is staring at an additional expenditure demand of about 3 lakh crore in financial year 2020-21

  • Disinvestment programme is totally grounded. Non-tax revenues will suffer in line with declining profits of PSUs, said Garg

New Delhi: With the COVID-19 impact grounding India’s disinvestment programme and the non-tax revenues declining in line with shrinking or disappearing profits of PSUs, the government is staring at an additional expenditure demand of about 3 lakh crore in financial year 2020-21. In a blog post, Garg said that the Budget 2020-21 has started falling apart right at the start of the financial year as the COVID-19 pandemic has struck a bloody blow to the economy.

He added that the state governments’ finances have suffered more and they are also demanding support package, which the Centre will have to address sooner or later. “Budget 2020-21 of the Central government has started falling apart even when the financial year has just begun. COVID-19 has struck a massive blow to people, economy and budget... For the financial year 2020-21, the government may likely face additional expenditure demand of about 3 lakh crores,” he said. The government’s budgeted expenditure for FY 2020-21 is Rs 30.42 lakh crore or a little over $400 billion.

COVID-19 impact: Growing chorus for supporting businesses

The former bureaucrat noted that there is a growing chorus for fiscal measures aimed at supporting businesses, especially small informal businesses, and millions of workers who have been rendered jobless by the COVID-19 lockdown. He added, “Increasing expenditures and declining revenues will push fiscal deficit sharply.” He pointed out that government revenues have been badly hit as demand for petroleum products has almost collapsed, hurting customs and excise revenues. “Disinvestment programme is totally grounded. Non-tax revenues will suffer in line with declining or disappearing profits of public sector entities,” Garg wrote.

Govt will have to expand its Rs 1.7-lakh-cr relief package by Rs 80,000 cr

Referring to the relief package of Rs 1.7 lakh crore announced by Union Finance Minister Nirmala Sitharaman, Garg said that the government may have to expand the package by another Rs 75,000-80,000 crore. He pointed out that about 30 percent of annual budgeted expenditure is incurred in first quarter, as per the trend, after the government started presenting the budget on 1st February in 2017. While referring to the government’s April 8 decision to impose curbs on non-essential head, he said, “April 8 order is more likely to remain on paper.” The ministry had imposed spending restrictions on various ministries and departments in view of the revenue constraints created by the COVID-19 crisis.