Budget 2020 the toughest yet for Modi government? Here are its top challenges

Amid India's slowing ecomic growth, with country staring 45-year high on unemployment, Union Finance Minister Nirmala faces toughest Budget since Modi government came into power. While key challenge Finance Minister faces is kickstarting market demand, re are several more hurdles she faces to achieve impossible target of making India a $ 5 trillion ecomy. Several market analysts have sought loosening of tax laws to attract investment in India, Finance Minister has promised a 'pro-people' budget to offset challenges she faces.

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Why 2020 Budget is toughest one Modi govt faces?

Here are top challenges:

India's slowing GDP

Marking slowest growth in almost seven years,  India's second-quarter GDP (July-September) numbers stood at 4.5%. This slowdown in growth came inspite of government's various ecomic moves like merger of 9 PSU banks into 4, major corporate tax cuts, policy changes in automobile sector, reduction in tax regulations to boost foreign income, attract investors and increase consumer demand. Moreover, growth prediction set for next year is at 4.8% while consulting firm EY estimated that India needed to grow at 9% to reach its $5 trillion target.

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Job crisis

According to SBI research report- Ecowrap, ecomic slowdown has led to nearly 16 lakh less jobs are projected to be created in 2019-2020 in comparison to 89.7 lakh new jobs in 2018-2019. Moreover, re is a decline in remittances of migrant labourers in Assam, Bihar, Rajasthan, Odisha and UP due to delay in resolution of cases under bankruptcy proceedings. report furr said in last five years, overall productivity growth has remained relatively stagnant between 9.4% to 9.9%, which has in turn led to low w growth.

Moreover, with unemployment figures being contested by Centre, re is severe mistrust among citizens on numbers released by Nationals Statistics Office (NSO). Former CEO Arvind Subramanian h claimed that India’s ecomic growth rate has been overestimated by around 2.5 percent points between 2011-12 and 2016-17 due to a change in methodology for calculating GDP, which h led to people wondering wher current growth rate is at 3%. While Modi government has rebutted fudging data claims, Modi government has set up a committee on statistics heed by well-kwn critic Pronab Sen - in a bid to clean up statistics system to provide a realistic picture and plan to tackle job crisis.

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Diminishing FDI

Inspite of Modi government's push for Foreign investments in India, foreign investments hit a dece-low in September 2019 - Foreign Investment to GDP ratio was at 1.1% in 2018-2019, declining by 43% from last year. While efforts have been me by liberalising foreign direct investment rules, previous budget imposed an ditional surcharge on rich which was n rolled back - but failed to convince investors. FDI since n has picked up according to Global Investment Trend Monitor report with India attracting $40 billion in investment. This budget will aim at pushing investment furr as UNCT expects FDI flows to rise moderately in 2020.

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Stagnating market demand, growing inflation

Slumped ecomic growth has led to twin evils - low demand, high inflation. Experts have stated that series of b regulations and internal mismanment have led to five consecutive months of stagnating domestic demand for goods and services. While government aims an ambitious target of US $1 trillion in goods and services export by 2024-25, government also raised import duties on major industrial inputs like steel and aluminum, automobile parts, appliances like camera, television, and smartphones and pulled out of Regional Comprehensive Ecomic Partnership. This has hurt India's exports bly and is a challenge that has to be tackled by this budget.

On or hand, consumer price index (CPI) rose 7.35% in December, hitting highest since 2014 - driven by a rise in onion prices. Apart from untimely rains, drought in some regions and crop losses, government's untimely import policies have led to stey growth in vegetation and pulse prices, state experts. Moreover, government's high stockpile has kept inflation rising, according to experts, which will have to be tackled by government as food accounting for two-thirds of ir household budgets - which in turn worsens demand.