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Your Email: Send me a copy: https://mybs.in/2ZbNwwH Finance Minister Nirmala Sitharaman has promised an extraordinary Budget to deal with the extraordinary fallout from the pandemic. Let’s look at some of the challenges she faces. The economy was shattered by the pandemic and lockdown. It has seen once-in-a-lifetime contraction, and millions have suddenly been rendered unemployed. The highest priority for the finance minister will be to ramp up growth as much as possible, and to do this while providing maximum employment opportunities. Weak government finances present another challenge. The Fiscal Deficit has expanded in 2020-21, due to low tax collections and missed disinvestment targets. This means the government has little room to expand expenditure further because the fiscal deficit could go out of control. It also means the government will have a massive market borrowing programme through 2021-22. That could crowd out private borrowing.
Rising Capex towards urban projects slowed in FY21 till now The government’s spending on urban development is majorly on metro projects (capital expenditure), housing for the underprivileged, and the urban renewal projects. Nearly half of the ministry spending is productive capex. But in the current financial year, the flow towards capex has slowed down a bit, due to the need to spend financial resources elsewhere. Big Hindi heartland states have spent most efficiently on Smart Cities projects The Smart Cities mission was instituted to bring in investments in cities, which are undoubtedly the engines of growth. But against the work orders of over Rs 1 trillion issued to date, project to the tune of Rs 29,000 crore (27%) are complete (Sep 2020). But urbanisation varies across states. MP and UP lead in per capita spending under the initiative
Read more about What FM Sitharaman may and may not do in her promised never-before Budget on Business Standard. Wish lists are routine as the govt prepares its annual Budget. But its finances are stretched and the pandemic isn t over. Akash Podishetty lists what the FM could announce in the Budget on Feb 1
Read more about Banking on Budget: The five areas of focus for FM Nirmala Sitharaman on Business Standard. Given the series of policy announcements made by Finance Minister Nirmala Sitharaman in the last 9 months it is reasonable not to expect more this time
Your Email: Send me a copy: https://mybs.in/2ZbKijM Central PSUs transfer a sizeable dividend to the government Centre has nudged PSUs to pay higher dividends to assuage revenue pain. Their contribution to exchequer is not negligible. In fact, it is close to the entire urban development Budget of the Centre. Low oil prices coupled with higher margins have increased chances of higher dividend from oil PSUs, the top dividend payers. A stock market boom year saw a depletion of PSU value on market indices Though the stock market touched new highs in 2020, the PSU index was late to the party, and has barely recovered to January 2020 levels. A sharp decline in their equity valuations, many of whom are sector behemoths, has already skewed their debt-equity ratios. This may weigh on dividend payout this financial year.
Read more about Budget Byte: Export needs budgetary support for overall economic growth on Business Standard. Strategic incentives through the Budget may help boost exports.
Read more about Budget Byte: Borrowing to boost spending but debt will bother govt on Business Standard. Even before Covid-19 struck the economy, government was borrowing at a rate that was very close to the nominal GDP growth
Read more about Banking on Budget: Keeping an eye out for growth focus, PSU reforms on Business Standard. While the govt should try to push divestments, it should understand that reforms in the PSU space are very important if it wants to offload some its stake in the market
Read more about Budget Byte: Disinvestment way behind target of Rs 2.1 trillion, again on Business Standard. This daily series of graphs provides context on some of the critical issues relating to the Union Budget on February 1