By spending, the Union Budget offers an antidote to poverty
Finance Minister Nirmala Sitharaman has created a buzz in the market. Her budget will help rebuild consumer confidence
Finance minister (FM) Nirmala Sitharaman had promised that it would be a budget like no other, the best of the century. It was a bold statement. But she has delivered.
Perhaps no other FM in free India was faced with such gigantic problems — a raging pandemic; a fragile health care system bursting at the seams; low consumer confidence; farm agitation; and the border tensions with China.
Faced with a once-in-a-lifetime crisis, it was time for some big decisions. The budget demonstrates that the government has the political will as well as the financial know-how to put the damaging economic crisis behind us, and push India on its way to a robust growth path
The budget’s big-ticket ideas revolve around capital spending. Economists had urged the FM to “spend, spend and spend”. She appears to have done just that, without (rightly) bothering about international rating agencies which might have something to say about India’s fiscal deficit. But there is a national consensus to spend now, spend for the next few years, and then worry about the fiscal deficit. This is bold but timely, and will boost demand.
There is a sharp increase in capital expenditure to ₹5.54 lakh crore, 35% more than in the last fiscal. This is in addition to ₹2 lakh crore proposed to be given to states and autonomous bodies for their capital expenditure.
The outlay for health and well-being, to the tune of ₹2.2 lakh crore as against ₹94,452 crore in the previous year, is significant. A new centrally-sponsored scheme, called PM Atmanirbhar Swasth Bharat Yojna, to be launched with an outlay of ₹65,500 crore, staggered over six years, is another big statement by the FM that she is not afraid to spend. A proposal to spend ₹35,000 crore on vaccination is a step in that direction.
But what is most striking is the Aatmanirbhar package. Prime Minister (PM) Narendra Modi publicly reiterated his resolve to once again make India self-reliant in a virtual Davos conference organised by the World Economic Forum (WEF) recently. This is a serious pledge to make India a global economic powerhouse and generate wealth for the poor and middle-class. Modi launched this movement on May 12 last year and, since then, it has become his mantra, even his government’s dharma. Every budget in the next few years has to help the PM realise his vision of self-reliance. This budget has made a strong beginning to achieve this goal.
The slogan of “vocal for local” — Modi himself encapsulated the spirit of the campaign in these three magical words — is music to the ears of Indian manufacturers and producers. The first step towards this goal was taken last year when the government brought a production-linked incentive scheme. Under this scheme, Indian companies will get 4-6% incremental concession for the next five years on making goods inside the country.
The creation of infrastructure will continue to be on top of the list of priorities and the FM has listed quite a few new schemes, including the highest ever outlay of ₹1.18 lakh crore for the ministry of road transport and highways, of which ₹1.08 lakh crore is for capital. Large capex and focus on infra will boost growth and create enormous employment opportunities for both white and blue collar jobs.
The emphasis on disinvestment and asset monetisation is not a novel idea, but a much-needed one. Last year’s plans were disrupted by the pandemic, but the FM has promised to be super proactive on this front in the fiscal year 2021-22, which will fill the government coffers by up to ₹1.75 lakh crore.
In short, Sitharaman has created a buzz in the market. Her budget will help rebuild consumer confidence. A budget is not a magic wand to end all our economic woes and one budget is never going to be enough to tide over all the difficulties. But her intent is clear — and that is to lead India’s V-shaped economic recovery with all the government’s might.
Syed Zafar Islam is a Member of Parliament, national spokesperson of the BJP, and a former managing director, Deutsche Bank, India
The views expressed are personal