Union Budget 2020 India: Finance Minister Nirmala Sitharaman, who is facing a tough task of driving the economy out of probably the toughest times, may not go overboard in setting growth target for FY21 in her second budget speech. The minister perhaps would set the target for nominal GDP growth to 9.5-10 per cent as she now doesn't have the time for 'picking optimistic target' experiments, IANS reported citing sources as saying. Also, the Prime Minister's Office (PMO), which is linked to the budget even at the micro-level has asked the Finance Minister to avoid having over-ambitious tax revenue and fiscal deficit targets, according to the report.
"This year, there will be a realistic assessment of the nominal GDP," a source said along with tax revenue and fiscal deficit targets in order to avoid failing to meet them. Tax officials, in the event of overestimation of nominal GDP, to give confidence to investors, rating agencies etc, have to meet huge targets via tax demands and raids. This is not quite convenient for investors and individuals.
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Moreover, the ministry and PMO officials are going through broad economic figures of budget documents in detail so that they are not embarrassed because of ‘clerical’ errors. The finance minister had set 12 per cent nominal GDP figure in FY20 budget estimating the GDP at current prices at Rs 211 lakh crore, the "medium-term fiscal policy cum fiscal policy strategy statement", presented with the budget, re-set it at 11 per cent that led to a significant criticism against the government. Now, the advance estimate projects the growth to be at 7.5 per cent for FY20.
Now given the nominal GDP growth is expected to be low, the tax collection target might be conservative, said people linked with developments. The United Nations World Economic Situation and Prospects (WESP) 2020 on Friday lowered India's GDP growth estimate to 5.7 per cent in FY20 from 7.6 per cent forecast in WESP 2019, PTI reported. It also cut the forecast for FY21 to 6.6 per cent from 7.4 per cent earlier.