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Budget Analysis 2019

Budget Analysis 2019 Dr Rathin Roy: Director and CEO, NIPFP, Delhi
Venue: Vishwabhawan Auditorium
Date: 15th July 2019

The Vishwabhavan at SB Road on Monday, July 15th played host to Dr. Rathin Roy, Director of the National Institute of Public Finance and Policy (NIPFP) who was invited by Symbiosis School of Economics (SSE) to deliver a lecture on the recently tabled Union Budget 2019-20.
The conference commenced with Dr. Jyoti Chandiramani, Director of SSE, welcoming the gathering. She laid the context of the discussion that was to follow, by highlighting the importance of the Budget as a fiscal policy tool which should be more outcome oriented and questioning whether the budget had an adequate roadmap for realizing the promise of making India a 5 trillion dollar economy by 2024-25. Given the need for structural reforms as highlighted in the budget document, she posed a question to Dr Roy, regarding the type of reforms to address the “structural distress” of the economy.
Dr. Roy then took to the stage and remarked that while a Budget should not normally elicit an emotional response (‘it’s the economy that should be exciting’) this year’s Budget was rather distressing. He opined that the numbers were indicative of India currently going through a silent ‘fiscal crisis’ akin to a ‘silent heart attack’.
He brought attention to the alarming discrepancy between the revised estimates of the Budget and the numbers presented in the Economic Survey. Specifically, he mentioned, that both government expenditure and revenue had shown an alarming shortfall. While the cuts in expenditure were mysterious given that it was an election year, the revenue shortfall that was equivalent to 1% of GDP (or 1,70,000 crores) stemmed from a fall in GST collections. He also stated that the budget did not clearly state how the adjustments in the shortfall were accommodated.
Dr. Roy elaborated that the belief that the GST would be revenue neutral was incorrect. The Centre was lagging in its collection estimates and this shortfall was being amplified by its commitment to compensate the states for revenue losses faced by them. Additionally, he threw light on the shrinking size of the Centre’s budget since 1991 and the competition for funds with the states. Centre has been collecting additional taxes under the guise of ‘cess’ which meant that the Centre was not obligated to share those funds with the states.
The NIPFP Director criticized the Budget’s promise to raise additional funds through foreign borrowings stating that the last time India made such a move, it was to save the nation from bankruptcy in 1991. Given the government’s promise, later on, to never borrow foreign funds, this proposal of the Budget was a worrying reversal on the same.
He backed his argument by citing instances from India’s ancient history and the macroeconomic crises that were faced by countries such as Argentina and Turkey.
Dr. Roy concluded his talk by making a case for a long term view of approaching fiscal policy for a sound economy – keeping a four year policy framework. He emphasized that the government should be forthcoming with its data and focus on ensuring the basic necessities of the people - food, clothing, housing, health, and education.
The session came to an end with Dr. Debdulal Thakur, Deputy Director of SSE, delivering the vote of thanks.