The Union Budget 2021 came at the backdrop of the wide-spread COVID-19 pandemic, in times the country has perhaps never witnessed. Not only did the Corona virus make the times unique but also the staggering 45-year high unemployment, negative growth rate, a 15.7% export contraction to US$ 200.8 Billion (April to December, 2020), an atrociously high fiscal deficit of 9.5% of GDP and rising prices, with CPI averaging at 6.6% (primarily due to food inflation and supply disruptions). Perhaps, the only rise is seen in the share markets (running an absolute free run reverse to all economic indicators) and the GDP (as defined by some sections of the Opposition) – Gas, Diesel & Petrol.
The businesses, across scales, have been hit financially by the Covid-19 pandemic. In return of their expectations of relief, businesses have been slapped with the same tax rates as the previous year. There were also questions with respect to the Govt. revenue models which were quelled by the Finance Minister claiming that better compliance would be ensured. One wonders if tax terrorism is on its way? However, Finance Minister Nirmala Sitharaman on Monday announced that the government will be setting up a faceless tax dispute resolution committee to ensure efficiency, transparency and reduce litigation for the small taxpayers.
“The faceless dispute resolution committee will be for taxable income up to Rs 50 lakh and disputable income of Rs 10 lakh, all communication between the appellant and tribunal will be via electronic mode.” ~ Smt. Nirmala Sitharaman, Finance Minister, Government of India.
The move of disinvestment is also questionable. Recently when the Government tried to divest its stake in IDBI Bank, it found no takers. The Government was forced to ask LIC to put in a bid. And now, the government will be attempting to sell a stake in its crown jewel – the Life Insurance Corporation of India – via an IPO. Is the move aimed at funding the huge fiscal deficit or genuinely to promote privatisation?
“The government should divest its stake in IDBI Bank after it comes out of prompt corrective action (PCA).” ~ Rakesh Sharma, MD and CEO, IDBI Bank.
This brings our attention to another factor, that is, the humongous fiscal deficit. Fiscal deficit is expected at 9.5% of GDP, which cannot be excused even on account of the pandemic. The Budget 2021 seems to lack on the front of jobs and the Govt’s unwillingness to put direct cash into the hands of the people.
Ms. Sitharaman allotted 93 thousand crores to the Ministry of Education, which is a shocking 6% lesser than the previous fiscal year. Education has perhaps been one of the largely hit sectors with the studies of thousands of children affected due to the pandemic and the shift to online, poor infrastructure can be attributed as the primary cause of the same. While, the Budget made provisions for 100 new Sainik schools that will come up across India in partnership with NGOs and Private schools and a Central University in Leh, the fundamental question that pops is the lack of interest shown to improve conditions of existing educational schools in order to enable online learning.
While there has been an announcement that the National Initiative for School Heads and Teachers for Holistic Advancement (NISTHA) will train 56 lakh school teachers in 2021-22 digitally, better steps could have been taken up to make the online education accessible to the students as it takes two to tango!
The West Bengal Government is transferring Rs. 10,000 to around 9.5 lakh students studying in the state. The scheme encompasses class 12 students of various government-aided schools and also madrasas. Secondary schools too will be provided with computers so that online education can be made possible.
The only good part is that it has not increased the Direct Tax burden on individuals and corporates and maintains a general status quo. However, these challenging times call for more risk-taking and pro-active measures, rather than maintaining status quo. There was no direct support given to the worst affected sectors like tourism, hospitality and NBFCs. On the other hand, the Budget has proposed the imposition of a Agri-Infra cess, which is likely to make things expensive. This will throttle attempts to boost demand. The Finance minister imposed Agri-Infra cess of Rs. 2.25/litre on petrol and Agri-Infra cess of Rs. 4/litre on diesel.
Excise duty collection went up to ₹3.61 trillion against the budgeted ₹2.67 trillion, thanks to an increase in the excise duty on petrol and diesel. There was also good news for senior citizens who only earn a pension and interest income. They will now be exempted from filing income tax returns. This should be of some help particularly to retired public sector and government employees. Also, there was no introduction of wealth tax or any fiddling around with the capital gains tax on stocks. This probably led to the BSE Sensex rallying by 2,315 points or 5%, from Friday’s close. Over and above this, the additional deduction of ₹1.5 lakh which is currently available on interest paid on a home loan to buy an affordable house, will continue to be available next year. The total expenditure budgeted for the next year is at ₹34.83 trillion, which is more or less similar to this year, despite the fact that the government is initiating many new road projects.
One of the innovative proposals is the monetisation of surplus land lying with government ministries and public sector enterprises. This is a good way to raise money to fund infrastructure projects. The government has increased the foreign direct investment limit in insurance companies to 74%, from the current 49%. FM Sitharaman announced a package of Rs 27.1 lakh crore to deal with the pandemic under AtmaNirbhar Package. This budget was also the first paperless budget ever presented. She also announced a voluntary vehicle scrapping policy to phase out old and polluting vehicles which will promote fuel-efficient and environment friendly vehicles while cutting on India’s huge import bills. The start-ups also got a boost as they can have tax holidays of 1 year.
“Laying down the vision for providing further fillip to the government’s flagship Aatmanirbhar Bharat Programme by spelling out the measures under the critical six pillars, the Budget ticked all the right boxes.” ~ Uday Kotak, MD and CEO, Kotak Mahindra Bank Limited
Among other reasons that have upset the middle-class population is the rise in customs duty on some products. Reports have already started indicating that prices of some consumer durable items and smartphones will rise. Customs duty on some auto parts has also been raised to 15 per cent. Citizens feel that this will lead to a further hike in vehicles prices.
There is also a general sense of disappointment regarding the high taxes on petrol and diesel. The government did slash basic excise duty and special additional excise duty on both fuels, but it has introduced a 2.5 per cent cess for agricultural infrastructure development. The end result is that the price remains the same.
We now look at the five major sectors and analyse each closely:
Agriculture and allied sectors:
“There is a mantra in the Rig Veda which means…praise to the giver of food, praise to the farmer. Our farmers have proved their mettle even during this Covid-19 pandemic.” ~ Prime Minister Narendra Modi in one of his ‘Mann Ki Baat’ programmes.
The budget allocation for the Department of Agriculture, Cooperation and Farmers Welfare was cut down by 8.5% in 2021-22. The flagship PM-KISAN scheme which was meant to provide income support to farmers had a 13% drop in its budget, which is ₹10,000 crore lower than last year’s allocation. This decrease is while farmer protests are still going on.PM KISAN, which gives each landowning farm family ₹6,000 of annual income support, has reduced its budget to match last year’s revised estimates which reached 9 crore households, rather than trying to reach out to its original target of 14.5 crore households. The Finance Minister said in her opening statement “Our Government is committed to the welfare of farmers.” The statement of the Finance minister is significant at a time when a large number of farmers are protesting for a legal guarantee to minimum support (MSP) price fearing that the government will end the MSP system after implementation of the three farm laws aimed at freeing up the agriculture markets.
The government on the other hand has reassured farmers that the MSP system will continue and will be further strengthened. Sitharaman said that the disbursement to pulses farmers and cotton farmers have also gone up substantially with money paid to pulses farmers is more than 40 times to Rs 10,532 crore in 2020-21 from Rs 236 crores in 2013-14. “The amount paid to cotton farmers has gone up to Rs 25,975 crore in 2020-21 as on January 2021 – up from Rs 90 crore in 2013-14,” she said.
“In this Budget, the government has made a provision to empower APMC mandis along with its commitment to MSP. Originally, these were the two main doubts regarding the agricultural bills.” ~ Shri Narendra Singh Tomar, Agriculture Minister, Government of India.
The Union Budget of 2020 aimed to twofold the pay of farmers by 2022 but as per Economic Survey, the growth in real wages for agricultural workers has been negative during Q4 FY19 – Q3 FY20 probably because of the pandemic. Agriculture in India constitutes 14% percent of GDP, 44 percent of employment and is the backbone of the rural economy but contributes only 16% of Gross Value Added (GVA). Hence, government intervention and assistance had become essential to facilitate implementation of both policy and structural reforms to address some of the key challenges in agriculture. A financial plan of Rs. 2.83 lakh crores were dispensed to the agriculture and its associated areas. Presentations of “KrishiUdaan” and “KisanRail” for consistent transportation of farm goods to the consumers were made. The initiative to develop ‘KisanRail’ for transport of perishable goods is a visionary move that can change the basic functioning of the cold chain industry. It is revolutionary not only for India but all developing countries across the globe. Agri-credit office of Rs. 15 lakh crores were accessible for farmers for the FY 2020 – 21.
Allocation to the Ministry of Agriculture and Farmers’ Welfare increased primarily due to an increase of Rs 20,630 crore in allocation to the PM-KISAN scheme. While the agriculture budget allocation is higher, the funds to the Food Corporation of India (FCI) which controls the Public Distribution System (PDS) was slashed. This lack of funds pressed the FCI for resources. The allocation for MNREGA too was decreased in 2020.
The allocation for the Ministry of Agriculture was Rs 1,30,485 crore and fertiliser subsidy is Rs 79,996 crore for the year 2019-20. The budgetary estimate for the Agriculture Ministry for 2019-20 is 140 percent higher than that for 2018-19 at Rs 57,600 crore, primarily due to Rs 75,000 crore allocation to PM-Kisan. More than 77% of the Ministry’s budget was proposed to be spent on three schemes under this Department: PM-KISAN (54%), Interest Subsidy scheme (13%), and Pradhan Mantri Fasal Bima Yojana (10%).
The government’s proposal to transfer Rs 6,000 a year to marginal farmers under PM-KISAN was a good first step but a lot was needed to be done to make a real difference to the agricultural community which was suffering because of erratic rainfall and low prices in recent years. Anecdotal evidence suggested that landowners who never bothered to cultivate crops on the land they possessed were rushing to register their land records in order to receive the cash benefit. Such ‘farmers’ or absentee landlords enjoyed a small windfall of ₹6,000 a year. It is to be noted that this declaration of transfer of Rs 6,000 a year happened in the same year in which the Lok Sabha elections were held.
The Ministry was allocated Rs 57,600 crore in 2018-19. It was 14.6% more than the revised estimate in 2017-18. About 82% of this allocation was proposed to be spent on five schemes. These are the Interest Subsidy Scheme (32%), Pradhan Mantri Fasal Bima Yojana (28%), Pradhan Mantri Krishi Sinchayi Yojana (9%), Rashtriya Krishi Vikas Yojana (8%), and National Mission of Horticulture (5%). When it comes to bad loans in the farm sector, only 9 percent farmers were said to have paid EMIs for their borrowings against 70 per cent in the previous year.
“If a debate were allowed to happen, MPs could voice the concerns of their constituents, the farmers, & propose solutions to the crisis. But GoI is stubbornly refusing the Opposition’s request for a debate as they refused to agree to the farmer unions’ demands. This is undemocratic.” ~ Shri Shashi Tharoor, MP (Indian National Congress), on twitter.
Defence:
The overall defence expenditure for 2021-2022 has been increased by a paltry sum to Rs 4,78,196 crore from last year’s budgetary allocation of Rs 4,71,378 crore, which amounts to a mere 1.4% hike. The hike in defence budget has been largely criticised with a larger chunk being expected considering the falling diplomatic ties witnessed. China entering territory and claiming lives of soldiers is a first since the 1962 war, the long-standing Pakistan conflict was only worsened despite the numerous photo-ops. The open discussions of Defence plans like surgical strikes and linking it all of nationalism has made hostilities between India and Pakistan increase manifolds. In fact, our ties with neighbours like that of Nepal too have weirdly worsened with them declaring a new official map including Indian territory as their own. The tall claims of sound relations with the US too seem to be a mystery with the US acting more of a bully of late, clearly not a relationship between friends. It clearly would have been a better move to ensure India is AtmaNirbhar in defending its territory in case of an adverse situation.
In 2020-21, the Ministry of Defence was allocated Rs 4,71,378 crore. The allocation to the Ministry of Defence was the highest allocation among all ministries of the central government. The expenditure on defence constituted 15.5% of the central government’s budget and 2.1% of India’s estimated GDP for 2020-21. However, over the last 10 years, defence expenditure as a proportion of central government expenditure and GDP has decreased. In 2010-11, defence expenditure was 2.5% of GDP and 16.3% of central government expenditure, which has decreased to 2.1% of GDP and 15.5% of government expenditure in 2020-21.The disappointing part is that there has been a very marginal increase in the capital outlay for defence for 2020-21 as compared to the budget estimates and revised estimates for 2019-20, which affected several big ticket projects of the defence forces that were going to be done for building capabilities against China and Pakistan. Most of the defence expenditure had gone towards acquiring the new Tejas Mk 1A aircraft. Although indigenously developed, the aircraft took over three decades to reach fruition and match the capabilities of the MiG-21 aircraft. Also, the first batch of the much-hyped Rafale jets arrived in India on July 29, 2020 nearly four years after India signed an inter-governmental agreement with France to procure 36 aircraft at a cost of Rs 59,000 crore.
“Congratulations to IAF for Rafale. Meanwhile, can GOI answer: 1) Why each aircraft costs Rs 1670 Crores instead of Rs 526 Crores? 2) Why 36 aircraft were bought instead of 126? 3) Why was bankrupt Anil given a Rs 30,000 Crores contract instead of HAL?” ~ Shri Rahul Gandhi, MP (Indian National Congress) on twitter.
In 2019-20, the Ministry of Defence was allocated Rs 4,31,011 crore (including pensions) for expenditure across the various services, production establishments, and research and development organisations. It formed 15.5% of the central government’s budget of 2019-20 and 2% of India’s estimated GDP. The increase was highest for the capital outlay component of the defence budget, which grew at 10%. Salaries and pensions grew at 5.5% and 5% respectively compared to the revised estimates of 2018-19. India became the third largest military spender in the world, after the US and China, according to a Stockholm International Peace Research Institute (SIPRI) report. It was the first time that India and China were among the top three military spenders. India’s “tensions” and “rivalry” with Pakistan and China were among the main reasons for its increased military expenditure. It was the highest military spending in South Asia.
Health and Family Welfare
The Finance Minister announced that the outlay for ‘health and wellbeing’ in the current budget is Rs. 223,846 crores as against the previous year’s budget estimate of Rs. 94,452 crores (an increase of 137%). This increase cannot be termed as surprising as these are testing times and this can be expected considering a pandemic is still going on. Moreover the 35,000 crores allocated for the vaccines is perhaps just one time and not recurring. A new scheme called PM AtmaNirbhar Swasth Bharat Yojana was proposed to be launched with an outlay of about Rs 64,180 crore over 6 years to develop capacities of healthcare and also for creating new institutions to cater to detection and cure of new and emerging diseases.
The ‘health and wellbeing’ category is dominated by water and sanitation, and given the government’s focus on universal coverage of drinking water supply, it has seen an almost 300% increase in allocations. Apart from the Central support for vaccination (Rs 35,000 crores) and the Finance Commission Grants to the health sector (Rs 13,192 crores), the increases are fairly modest, amounting overall to 10.5%. Big ticket investments to enhance access to water are praiseworthy, but unfortunately, one cannot expect to fight a pandemic by only using externalities from the water sector. However, the increased allocations is praiseworthy and reflects the Government will to support one and all in these testing times.
“Therefore we welcome the FM’s emphasis on healthcare spending and immunisation, especially for COVID-19 and the pneumococcal vaccines as this will help India recover rapidly from this pandemic. Hopefully, this will also encourage more innovation and expansion in the sector.” ~ Shri Adar Poonawalla, CEO, Serum Institute of India.
India’s public health expenditure (sum of central and state spending) has remained between 1.2% to 1.6% of GDP between 2008-09 and 2019-20. This expenditure is relatively low as compared to other countries such as China (3.2%), USA (8.5%), and Germany (9.4%). In 2020-21, the Ministry received an allocation of Rs 67,112 crore (increase of 3.9% over the revised estimates of 2019-20) while the total allocation for healthcare was 94,452 crores. The slow pace increases in the healthcare budget made it difficult for India to achieve sustainable goal targets like reducing infant mortality. According to UNICEF, India ranks 12 out of the 52 low-middle income countries with the highest infant mortality rates. Most private medical colleges do not have big hospitals. The Centre’s plan was to expand the government’s flagship health insurance scheme Ayushman Bharat-Pradhan Mantri Jan Aarogya Yojana (AB- PMJAY). Of this, around Rs 6,400 crore would be for AB- PMJAY scheme. Even assuming every rupee of the allocated 6,400 crores is spent on provision of healthcare, this amounts to roughly 128 rupees per insured person when working with the government’s number of 50 crore people covered. Given that the average cost per hospitalisation varies from Rs 17,000 to 27,000 depending on whether it is rural or urban India, it’s no wonder that third-party claims administrators (TPAs) and healthcare providers are wary of signing up as they’re not confident of receiving adequate and timely reimbursement. India ranks 145th globally in terms of healthcare access and quality, a ranking that places us below not just Bhutan and Bangladesh but also Sudan. The Department of Health Research was allocated just 2,100 crores while Harvard Business School alone has a research budget of greater than 5,300 crores.
In 2019-20, the Ministry of Health and Family Welfare received an allocation of Rs 64,559 crore. This allocation was an increase of 15.2% over the revised estimates of 2018-19. In the Union Budget speech of 2019-20, the topic of health was nearly absent. Aside from a single line in the vision statement and a couple of paragraphs on Swachh Bharat, the customary focus on health and healthcare was missing. This did not place us on track to reaching the National Health Policy commitment of increasing public health spending to 2.5% of the GDP which in 2019 was at 1.1% of the GDP.
Infrastructure
“We welcome the spending on infrastructure but after 8 quarters of a slowdown and 4 quarters of a pandemic, the same kind of emphasis should have been given to the poor, working class, migrants, agricultural labourers and so on. The Budget may have had a mind behind it but certainly no heart behind it.” Shri P Chidambaram, MP (Indian National Congress) & Former Finance Minister of India.
The splurge of money towards the poll bound states would make a state wish for annual elections rather than the present form of once in 5 yrs. Four poll-bound states get major highway projects: Tamil Nadu (3,500 km – Rs 1.03 lakh crore), Kerala (1,100 km – Rs 65,000 crore), West Bengal (675 km – Rs 25,000 crore) and Assam (1,300 km – Rs 34,000 crore).
Infrastructure needs long term debt financing. A big announcement was made for the creation of DFI, a professionally managed Development Financial Institution (DFI) to act as a provider, enabler and catalyst for infrastructure financing. The finance minister provided a sum of Rs. 20,000 crores to capitalise this institution. The hope is that it can create new loans worth ₹5 lakh crores over the next three years.
“A DFI was the need of the hour for the infrastructure sector. The sector needs a long term source of funds and the banks have a significant liquidity issue. Therefore the introduction is a welcome one. However this is a concern around the source of fund. Unless the DFI has access to cheap international source of funds it may meet the fate of previous attempts at securing institutional long term funds in the past.” ~ Shri Deepto Roy, Partner, Shardul Amarchand Mangaldas & Co.
Finance Minister Nirmala Sitharaman allocated Rs 1.7 lakh crore towards transport infrastructure for Budget 2020-21. To augment India’s infrastructure and create jobs, the government launched Rs 103 trillion infrastructure projects. The new projects would include housing, safe drinking water, access to clean and affordable energy, health-care, educational institutes, railway stations, airports, bus terminals, metro and railway transportation, logistics and warehousing, irrigation projects, etc. The Finance minister emphasised that a huge employment opportunity exists for India’s youth in construction, operation and maintenance of infrastructure and National Skill Development Agency would give special thrust to infrastructure-focused skill development opportunities.
Besides, accelerated development of highways was proposed to be undertaken which would include development of 2,500-km access control highways, 9,000-km of economic corridors, 2,000-km of coastal and land port roads and 2,000-km of strategic highways. She said under electronic tolling on national highways, FASTag mechanism enables greater commercialisation of highways so that NHAI can raise more resources. She also said that the Delhi-Mumbai Expressway and two other packages would be completed by 2023 and work on Chennai-Bengaluru Expressway would also be started. On ports, she said the government would consider corporatizing at least one major port and subsequently its listing on the stock exchanges. Inland Waterways received a boost in the last five years, the Finance Minister announced the JalVikasMargon National Waterway-1 will be completed and further, the 890 Km Dhubri-Sadiya connectivity will be done by 2022.
About air traffic, she said 100 more airports would be developed by 2024 to support Udaan scheme and it is expected that the air fleet number shall go up from the present 600 to 1,200 during the time. The Finance minister had proposed support to the farmers for setting up solar powered hand pumps and grid connected solar plants on barren lands owned by farmers. The five-year-long National Infrastructure Pipeline (NIP) will enter its second year in FY21, during which ₹19,50,397 crores was invested. The ambitious plan with a massive budget is getting bogged down by time delays and cost-overruns across many projects. At the end of quarter 2 of FY20, more than one-third of infrastructure projects were delayed and the overall original cost estimation of those projects had been overrun by 20%.Railway infrastructure projects have exceeded their original cost by 45% with 61% projects getting delayed.
Banking and Finance
The Banking sector drew cheer from announcements such as the proposed recapitalisation of Public sector banks up to Rs. 20,000 crores and a new asset reconstruction company & an asset management company to take over existing stressed debts. FDI limit in the insurance sector (previously opposed by the ruling party) has now been raised to 74% from 49%.
However, the privatisation of two public sector banks and a general insurance company has drawn mixed responses. Proposal to sell balance holding of government in IDBI Bank was done for FY 2020-21. The government had earlier approved consolidation of 10 banks into four. In the last few years, the Government of India has infused about 3,50,000 crores by way of capital into Public Sector Banks for regulatory and growth purposes. To strengthen the Cooperative Banks, amendments to the Banking Regulation Act were proposed for increased professionalism, enabling access to capital and improving governance and oversight for sound banking through the RBI. The banking stocks made a huge gain after the budget was announced and most probably it was due to the announcement related to bad bank. The Indian banks had been suffering with the unpaid loan problem and so the government has decided that all the loans which are unpaid will be moved to the bad bank so that the other Indian bank’s books will only contain loans which will be repaid back. It will help the banks to reduce their NPAs.
“Another important highlight of the Budget is the announcement of FDI in insurance from 49% to 74% which will attract more foreign players and lead to increased investments in the sector.” ~ Smt. Padmaja Chunduru, Indian Bank MD and CEO.
Finance Minister Nirmala Sitharaman said that government has infused Rs 3.5 crore capital into public sector banks (PSBs) to help them maintain regulatory capital requirements and finance growth plans in 2020. In the last fiscal, government had sold stake in IDBI Bank to insurance behemoth LIC. In 2020, LIC owned 51 per cent controlling stake in the bank, while government held 46 per cent shares in the lender. She said that robust mechanism was in place to monitor and ensure health of all scheduled commercial banks and depositors’ money is absolutely safe. Her comment was in wake of recent irregularities in Punjab and Maharashtra Co-operative (PMC) Bank. The Rs 4,355-crore PMC Bank scam came to light after a whistle-blower informed the RBI about manipulation in books of the bank to give loans to the Mumbai-based realty firm Housing Development & Infrastructure (HDIL). She assured them that the government and the RBI were working to solve their problems.
Banking and finance sector received a huge boost in credit with the allocation of Rs 70,000 crore for public sector banks (PSBs) in 2019.NPAs of commercial banks were reduced by over 1 lakh crore in 2019 from 2018. The Finance Minister reported that there was a recovery of over Rs 4 lakh crore of bad loans due to Insolvency and Bankruptcy Code (IBC). RBI was set to be the regulatory authority for Housing Finance Companies to ensure efficient functioning. Government announced its intention to invest 100 lakh crores in infrastructure over the next five years. To this end, it also proposed to set up an expert committee to study the current situation relating to long term finance and our past experience with development finance institutions, and its recommended structure and required flow of funds through development finance institutions. Number of public sector banks reduced by 8, through consolidation. Government provided one-time 6-months partial credit guarantee for public sector banks, for the purchase of pooled assets of financially sound NBFCs. The Minister proposes a modern tenancy law. Loans of up to Rs 1 crore to be given to MSMEs for ease of access. The government promised to create a payment platform for MSMEs to enable them to pay bills, and save time. The Government extended pension benefits to 3 crore retail traders and shopkeepers who have a revenue of less than Rs 1.5 crore which was called the PM Karam Yogi Maan Dhan scheme. Global FDI fell to $1.3 billion from $1.5 trillion, but inflows in India remained strong at $54.37 billion, a growth of 6%. The limit on FPI in a company increased to 24%.
The share price of most banks went up after the declaration of budget. The share price of IndusInd Bank went ▲ 14.71%, share price of ICICI Bank went up ▲ 12.44%, share price of SBI went up ▲ 10.14%.
THE FINAL TAKE!
The Budget in some sense can be an opportunity lost. It was a great opportunity to fast-track the post COVID-19 growth process but there was no relief given to businesses as they are given the same tax rate as they earlier had. There were no major announcements to address the ongoing unrest on New Delhi’s borders, where thousands are protesting for the repeal of new agriculture laws. There were also no significant announcements on boosting consumption in the rural economy. The Defence expenditure was increasing at an annual average rate of 9% before this budget but this year, it increased only by 1.4% despite India’s tensions with neighbours.
The Budget came at a challenging time, but chose to maintain a general status quo. The good part is that there has been no increase in Direct Taxes, but even then, this Budget fails to give the necessary booster dose to the economy. Normalcy is still some time away and the high fiscal deficit remains to be a worry. While the healthcare sector did get the required dose of extra funding, the budget did not address other issues like unemployment and falling demand. In 2021-22, India is expected to register fast economic growth but it is to be remembered that the fast economic growth is the make up for the output lost in 2020-21. The upshot of the emerging Budget strategy is that the government would rather like to spend on building capital resources and in doing so “crowd in” private investments, which, in turn, will be the source of new jobs. But that is the logic on paper. In the real world, job creation will take time. For those who lost their jobs during the pandemic or those who could not get their first one, the outlook is still grainy. India was growing by just about 4% in 2019-20 going into the pandemic. Growing at the rate of 7% or 8% coming out of the pandemic probably in 2022-23 is not a foregone conclusion.
Let’s hope that the future does make each segment of our population Aatmanirbhar!
~ Article by Utsav Chirimar and Umang Gandhi
(Utsav Chirimar is a final year student pursuing Bachelor of Commerce(H) at St. Xavier’s College (Autonomous), Kolkata and Founding Student Board Member of the Xavier’s Finance Community.)
(Umang Gandhi is a second year student pursuing Bachelor of Commerce(H) at St. Xavier’s College (Autonomous), Kolkata and a Junior Associate of the Xavier’s Finance Community.)