Written by Tejasvi Surya and Madhav Agarwal
Ten years down the line when we look at the decade that went by and read about New India’ s growth story in the 2020s, the Union Budget of 2021-22 will surely serve as its prologue. This year’s budget presented by the Finance Minister Nirmala Sitharaman has been nothing but exemplary given the tough situations it was drafted in. It reflects the resilience of the Indian people in fighting one of the toughest enemies that there can be — a virus. And it captures the potential of the Narendra Modi government to make a comeback with the boldest of moves in the most challenging of times. Be it health and housing or roads and railways, the budget promises “inclusive development for an aspirational India”.
When the COVID-19 pandemic broke out, unlike other countries, India took the road less-travelled. It imposed the world’s most stringent lockdown at the very start. We took the boldest step at the most crucial time to save the invaluable lives of our citizens. The Principal Economic Advisor Sanjeev Sanyal rightly puts it, “We took a minus 24 per cent GDP growth rate on the chin”. Result? Today, we have not only successfully flattened the curve but have also positioned ourselves to save lives as well as build livelihoods through this year’s chiselled growth-oriented budget.
As a kick starter to the Indian economy, this year’s Union Budget envisages a capital expenditure (capex) — government’s investment in developing infrastructure like roads, dams, schools etc. — of Rs 5.54 lakh crore. This figure is 34.5 per cent more than the capex estimate of budget 2020-21 and the highest proposed in over two decades. Alongside the government’s budgetary provisions to build the requisite institutions and monetise certain assets, the high capex allocation implies a fairly heavy infrastructural rollout in the coming years. This public investment programme centred around the government’s National Infrastructure Pipeline (NIP) project is going to create jobs, push up demand in the economy and create assets for the generations to come.
What’s particularly notable in this year’s budget is how the government has stressed on maintaining its quality of expenditures and has not introduced any new tax structures. Former Prime Minister Rajiv Gandhi had famously remarked how he would allocate a rupee for the needy but only 15 paisa would reach them. As much as corruption was to blame for it, the Congress’ obsession with freebies and unwarranted revenue expenditures was an accomplice. Contrary to this, the Modi Government’s 2021-22 budget showcases sound economic prudence. The Budget has reserved a sum of more than Rs 44,000 crore with the Department of Economic Affairs for projects/ministries that show efficient utilisation of funds and are in need of more. Furthermore, by allowing a normal ceiling of net borrowing for the states at 4 per cent of GSDP (Gross State Domestic Product) for the year 2021-22 and an additional borrowing ceiling of 0.5 per cent of the GSDP, it provisions to enhance the share of capex in state budgets. Quality capex over the coming years is bound to have a multiplier effect within the economy, yielding a potential four times return on the capital invested.
Unlike previous budgets, this year’s Budget did not see any radical taxes/cess being levied upon individuals to make up for the fiscal deficit that unsurprisingly shot up to 9.4 per cent of the GDP as per RE 2020-21. The Modi government gave due regard to the financial crunch that the Indian population is facing in such trying times. Spending money on one hand through capital expenditure and taking it back on the other through increased taxes would have served little purpose.
Instead, true to its commitment of building an Atma Nirbhar Bharat, the government took it upon itself to finance the deficit through market borrowings in the current down-cycle. Not to forget, the government has already undertaken a strategic disinvestment approach towards PSUs to maintain the bare minimum CPSEs in four key areas: Atomic Energy, Space, Defence and Financial Services. Privatisation of two Public Sector Banks and one General Insurance Company in the year 2021-22, alongside completion of persisting disinvestments in PSUs like BPCL, Air India, IDBI Bank among others, is already underway. Coupled with the government’s rationalisation of schemes programme to ensure “minimum government and maximum governance”, much necessitated public funds will be freed up, which can then be utilised for capital expenditures. Eventually, the amassed fiscal deficit shall be weaned off gradually over the years once the private capex induced up-cycle kicks in.
This counter-cyclical approach is the brahmastra to starting up India’s double-digit growth story.
Interestingly, the budget does not constrain itself to the traditional modalities of its predecessors and gives impetus to Prime Minister Modi’s vision of ‘Sabka Saath, Sabka Vikas’ (support of all, development for all). One such initiative is the National Language Translation Mission (NTLM). An initiative that went much unnoticed, NTLM will open the doors of the government to millions who only speak regional languages. Regional language speakers from states like Tamil Nadu, Karnataka, Kerala and West Bengal will get convenient access to all government schemes and policy documents in their own language simply at the tap of a button.
Overall, the Union budget 2021-22 does not gesture false hopes but contains responsible and transparent promises for a brighter future of our country. It is truly about ensuring that no one is left uninformed and unconnected in our country that now has a population of 1.4 billion. It is about ensuring that no one has to die of hunger or unemployment simply because their state governments block their access to centrally-funded or sponsored social security schemes. This budget is simply about recovering from yesterday, reinvigorating for today and responding for tomorrow.
Surya is a Member of Parliament from the Bharatiya Janata Party and Agarwal is a student of political science and international relations at Ashoka University