The Budget is, indeed, positive for the economy, meeting broadly the expectations. It has opened numerous opportunities for domestic and foreign investors and placed the economy on a definite trajectory of growth and competitiveness. For the first time, this budget is depending on the growth effect of revenues to meet its elevated expenditures on sectors that carry multiplier effects, thereby pushing the economy on an auto propelled growth path and in the process enhancing employment generation. Most notably, it is the first digital budget in the history of India. In all these aspects it is a ‘Budget like never before’. Budget proves that ‘good economics can be good politics too’.
Many positives – Rs 5.54 lakh crore are provided for capital expenditure ie 35% rise in capex to be spent on sectors that carry multifold forward and backward linkages like health, infrastructure, finance especially aanking; privatisation of two banks and of IDBI Bank and one insurance company; Deposit Insurance Act 1961 to be amended with easy and time bound access of deposits to help depositors; FDI limit raised to 75% in Insurance along with granting some control to foreign owners which implies amendment of Insurance Act; Nil tax changes — both direct and indirect despite high fiscal deficit and numerous disruptions — a big achievement; emphasis on skilling programmes; laying down GST reform path including tackling of the issue of inverted duty structure; aiming at frictionless Customs duty structure; welcome changes in healthcare, agriculture and digitisation.
Other welcome proposals are strategic privatisation plan; IPO of LIC; divestments already announced to be completed by March 2022; asset reconstruction & management company to be set up, which is another name of Bad Bank, to tackle mammoth and disguised NPAs. There is a proposal to revive definition of small companies under Companies Act 2013; reduced compliance burden on senior citizens; reduction in time for IT proceedings; reopening of assessments period reduced from six years to three years except in cases of serious tax evasion cases; proposal to constitute ‘Dispute Resolution Committee’; national faceless IT appellate tribunal centre; relaxations to NRIs by way of removing hardship for double taxation and raising of tax audit limit among many other measures.
For the first time all critical policies — fiscal, monetary, trade, industrial, digital, start-ups, legal etc. along with previous budgets are moving in perfect coordination. For example, the RBI is likely to maintain a status quo on benchmark interest rate in its next monetary policy meeting outcome to be announced on February 5th.
Some negatives too — silent on efficient and cost effective execution of budgetary policies, which has been for long the bane of Indian economy. Though one among six focus areas is ‘minimum governance and maximum governance’, there is also a need to set up a monitoring panel of experts which should be responsible for achieving the same in the right spirit.
Further, it is a debt-funded budget. Returns from growth have to be far ahead of interest and repayment burden of debt to have an assured sustainable growth. Besides, care will have to be taken that the budget does not prove inflationary. There is a need to ensure bridging of the gap between stock market buoyancy and growth on the ground.
In the health sector, the government has to take a holistic mindset. Health sector comprises two aspects — health infrastructure and human resources. Nearly Rs 65,000 crore allocated for new health schemes is likely to be spent on health infrastructure but what about the softer part i.e. human resources. There is a need for trained human resources for the entire country. Besides, emphasis is laid on Health and Wellness clinics but what about existing primary healthcare centres, which are in dilapidated conditions.
Further budget speech mentions nothing about defense, an important sector in Make in India drive.
In sum, though the budget sets a perfect direction for the economy, the opening of the economy has a long way to go. Government with cooperation of industry, organisations and civil society need to work together to avoid any slippage in execution and implementation to take place.
The author of the article is an economist, and a former director of Economic Research & Training Foundation.