The government is willing to forgo fiscal discipline and tolerate fiscal slippage to enable it to spend more to infuse life into the economy.
By Vineet Agarwal
Finance Minister, Nirmala Sitharaman presented the Union Budget 2021–2022, touted as the best budget-in-100 years, in the backdrop of a once-in-a-century crisis, triggered by the Covid-19 pandemic. The general mood was that she adhered to the need of the hour and did the right thing by not worrying about the fiscal deficit pegged at 9.5% of the GDP. It demonstrates that the government was willing to forgo fiscal discipline and tolerate fiscal slippage to enable it to spend more to infuse life into the economy.
Further, an upbeat FM announced a new Center-sponsored scheme with an outlay of Rs 64,180 crore to boost healthcare infrastructure across the country. The main benefit of this is social. It is to enable the population access to affordable healthcare. A healthy India will contribute more to the economy, which is the long-term benefit of this announcement.
This budget was preceded by the New Education Policy of 2020. An allocation of 93224 crores to the Ministry of Education figures among major budgetary allocations. Hence, it was concentrated on human capital, one of the pillars of this budget. Along with providing quality education, it is focused on skilling through various schemes like partnering with UAE and Japan for skill development.
The targeted divestment of 1.75 lakh crore is the highest ever intended to reduce the fiscal burden on the Exchequer. While the common man has been shielded from not being burdened with Covid cess and tax increase in spite of a pre-budget build-up, a cess on Agriculture Infrastructural and Development was announced.
Regarding infrastructure, a record 8500 km of new highway projects have been announced in the budget. This entails big-spending, job creation, money in the hands of the labourer. While its long-term benefits like better transportation etc. cannot be denied, the government needs to be vigilant about the implementation because if projects are not executed timely, they will not be viable.
Additionally, over time, as the economy recovers, the fiscal deficit must be scaled back to the previously announced 3% level. The government also needs to be careful about a rise in the interest rate that is the other economic fall-out because of much higher borrowings to fund the budgeted plans.
(Vineet Agarwal is the President of ASSOCHAM. The views expressed by the author are his own.)