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Budget 2019 shows the need for 5-year road map

Sushim Banerjee
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Union Budget 2019: With the Budget for 2019-20 been announced, its implications for various population groups, different segments of the economy and policy perspectives of the government are being intensively deliberated. It clearly emerges that although the Budget indicates the income expenditure account of the government, various measures and relevant policies that have been notified spell out the spirit and intention of the party in power and therefore, most of these policy intentions having a longer time perspective, would be alive for many years beyond March 2020, the time for a fresh Budget for the next year.

This way, a 5-year approach of policy interventions by the government in various areas of the economy needs to be taken to evaluate the efficacy of these announcements. The major core schemes namely, MGNREGA, PM Krishi Sinchai Yojana, PM Gram Sadak Yojana, PM Awas Yojana, National Rural Drinking Water Mission, National Health Mission, National Education Mission, Swatch Bharat Mission, AMRUT and Smart Cities Mission, Bharatmala, Sagarmala, Ujala, among others, to be implemented by different wings of the government have been allotted budgetary support which in all likelihood would continue beyond the current fiscal.

Some of these schemes are generating demand for steel also. The total capex for Fy20 at `3,38,569 crore is budgeted at 6.9% over Fy19 actuals. A major part of this is spent by CPSUs out of their internal and extra budgetary resources. The uniqueness of schemewise allocation of funds imply that monitoring of the benefits accrued to the target segments would be more focussed and effective. The fiscal deficits (total expenditure less revenue receipts, recovery of loans and other capital receipts) have been contained at 3.3% of GDP against 3.4% in Fy19.

In the Economic Survey published a day before the Budget, one of the major roadblocks of enhancing the investment-GDP ratio in the country has been mentioned as lacklustre growth in private investment which is pulling down the GFCF-GDP ratio to 27.9% in Q4 from 30% in Q1 of Fy19. The Budget has drawn a roadmap of `100 lakh crore investments for the next 5 years at `20 lakh crore per annum. This is a quantum jump in the investment intentions by the government.

For a developing country like ours which has set a target of being a $5 trillion economy by 2025, GDP growth has to be led by investment and also by consumption. Our current share of investment in GDP (public and private) stands at nearly 29% and 70% is contributed by consumption (household, private corporate and government). While investment in infrastructure being steel intensive, generates good demand for steel (both long and flats) as it also requires supply of capital goods in the form of heavy machineries, power vessels, transformers and generators, the household consumption in housing and consumer durables contribute to steel demand generation (carbon, alloy and SS) in small tonnages but in high volume.

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As regards physical infrastructure and real estate developments, mention may be made of the new Metro Rail project to take forward in FY20 already operationalised 657 kms of Metro Rail network. In Railways, the PPP mode of investment has been allowed in track renewals and completion, rolling stock procurement and delivery of passenger freight services to carry forward the ongoing investment.

Clean cooking facility (by steel made LPG cylinders or by pipelines) would be made available to all willing rural households by 2022. While under PMAY-G scheme, approximately 1.95 crore houses would be made between now and 2022, around 47 lakh houses would be built under PMAY-U scheme which would adopt new technology. The new Jal Shakti Department would monitor piped clean water supply throughout the villages by 2024 and it would generate good demand for steel pipes and HR Coils.

The fiscal space available to fund the infrastructure spending being limited, the government has worked out a number of measures. Mention may be made of Credit Guarantee Enhancement Corporation, long term bonds with focus on infrastructure, investment permitted by FIIs/FPIs in debt securities issued by Infrastructure Debt fund. It has been rightly highlighted to develop corporate debt markets for infrastructure sector. In addition, aviation, media and insurance sectors have been opened for FDI infusion. Global Investment Meet, an annual event so long organised by various states has been proposed by the government to attract foreign capital to India in a much larger way.

As regards steel industry, the Budget has announced a change in basic customs duty which would render protection to Alloy and SS industry. The BCD on imports on semi-finished SS (HS Code 7218) and Alloy steel (HS Code 7224) has been increased from the current 5% to 7.5%, while BCD on import of MgO coated CRC, HRC, CR MgO Coated and Annealed steel, HRC Annealed and Pickled, CR Full Hard, has been reduced from the current 5% to 2.5% in order to incentivise indigenous production of CRGO steel (for transformers) which is not available domestically. The BCD on a few items of capital goods including auto parts has been enhanced to arrest the rising imports of these items.

(The author is DG, Institute for Steel Development & Growth. Views expressed are personal)