Finance Minister Nirmala Sitharaman held her first pre Budget meeting with top industrialists on Monday (December 14), amid expectations of the government presenting a growth-oriented budget to boost the economy recovering from the effects of the Covid-19 pandemic.
The meetings with industry chambers will be followed by two days of consultations with stakeholders in the financial sector and capital markets.
What do these consultations entail?
Apart from holding internal discussions on various key numbers of the Budget such as nominal Gross Domestic Product (GDP), projected fiscal deficit, and the revenue and expenditure accounts, the government meets leaders and stakeholders from across sectors such as industry, the financial sector, agriculture, and the social sector to take their inputs and suggestions into the Budget-making exercise.
Inter-ministerial consultations are also held on various policy issues that could be addressed through the Budget.
The Budget is like a financial plan of the government for the next year; it provides various financial numbers for the current year, and makes projections for the next year.
Tax policies and the government’s intent and vision on reforms is also articulated through the budget.
Sitharaman will present the Union Budget 2021-22 in Lok Sabha on February 1, 2021.
Why will the Budget for next year be unusual?
The Budget will come against the backdrop of the Covid-19 pandemic, which made the current year’s budgetary exercise largely redundant.
The government had to announce frequent policy changes and deviation from key parameters — such as fiscal deficit, market borrowings — to deal with the evolving economic situation. The economy recorded its worst contraction in the April-June quarter, and for the full year economists now project a contraction of 7-8 per cent.
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The next year’s Budget will need to balance the need for providing an impetus to growth and stepping up spending for infrastructure, while at the same time looking for ways to augment government revenues.
It will also take into account the recommendation of the Fifteenth Finance Commission with regard to tax devolution to states, and its suggestions on various other crucial issues such as the matter of spending on defence.
The government is expected to miss its fiscal deficit projections. It is expected that it will adopt the concept of “range” on issues of fiscal deficit and debt levels, instead of the “fixed point” targets currently prescribed.
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