The Budget backdrop was unique this year. Our growths had started dwindling over the couple of years from 8.2% in Q4 2018 to just 3.1% in Q4 2020 shortly before the pandemic. Our IIP was already down from 144 to 117, our NPAs in state-owned banks had risen to 11.3 per cent in March 2020 and our Youth Unemployment Rates rose from to 18 % in 2008 to 24% in 2020. Then comes the pandemic and the total lock-down and we finally end the year with a contraction in our economy by 7.7% and a fiscal deficit of 9.5%, the highest ever in recent history. Its rather commendable in my view therefore, to target a positive growth of around 14% (from of course a lower base) and a deficit of 6.8% (our normals have been around 3).
The economic survey 2021, aptly described the governments’ response to the pandemic as “swift and effective” and prospects for “a V-shaped recovery”. What I could not agree however, was with the second point on “humaneness” – when we remember the terrible ordeal faced by migrant workmen and their families, the heart rending pictures of one crore of young-India-on-streets criss-crossing the country, thousands of miles, famished, tired and worn-out – we would all want structured solutions to possibilities of such trauma in future, didn’t quite find financial actions in the budget documents. But I’ll come later to that.
The 15th Finance Commission tabled its first report as well and it says 41% goes to States (little less than last year) with 1% additional earmarked for J&K and Ladakh. I have a problem with this. I’m quite wary of the deficits States coming, in normal times its about 3% with the pandemic and the additional 3.5% of borrowings I wonder what the deficits will now look like.
My take: It’s a good way to present the budget with the “6 pillars” of “Atma Nirbhar Bharat”. Good things have been said and I like all of them. I could not however fathom how “Disinvestments” fall under “Atma Nirbharta” – its already OUR asset we are selling! Similarly, “Atma Nirbharta” in External Debts rising (I would rather go for taxing to a little extent the super-rich and corporates, raise money against classy citizens’ services thru non-tax revenues, radically down-size the governments and PSUs, reform the elections and attract investments in World Class tourism). I miss also, concrete plans on Climate and Environment (excepting for a mention of Hydrogen Energy) and focussed financial actions on reduction of inequality.
My second point is on the Stimulus Packages, Rs 20 lakh crores last year. In a way it was more than a Budget itself! Don’t we need to have an update on each of the heads. For example, States had a borrowing ceiling of Rs 6.4 lakh crores all together, then they were allowed an additional 3.5% of their GDPs, what’s the status there, because the Minister stated they had till then done only 14%. Similarly, what is the status of the “Agri-Infrastructure Fund of Rs 1 lakh crores. What was the funding, the usage and the balance? Why raise a cess now? Also, fundings for MSMEs, what status?
Coming to Budgetary Allocations, of Rs 2.23 lakh crores on health, only Rs 35,000 crores are for vaccines. Looks too less for Rs 30 crores of health workers, front line workers and senior citizens – at Rs 700 a pair, you have hardly anything for the remaining 100 crores! The total health-spends are still around 1.5% of GDP far away still from the benchmarks of 4%.
I’m not clear what urgent necessity there was, to reduce the MNREGA allocations from Rs 1.12 lakh crores to just Rs 73,000 crores, I think that was extremely useful asset-creating help for migrant labour unable to get back their pre-COVID jobs.
Capital Expenditure going up by Rs 1.2 lakh crores is excellent, but I did not understand why between Market Borrowings and External Borrowings there is need to increase Rs 3 lakh crores. The thrust on R&D is well founded, from a GII rank of 80th five years back on, we are today 48th of 130 countries. We should do more. That will bring Atmanirbharta!
Education at 3.5% is much better now, the key is in implementation.
One last point on Defence Expenditures, 3.47 lakh are up just 1%, I only hope it’s enough, also didn’t find enough Make-In-India and Off-Set Clauses initiatives on the Rafale agreements.
In the tax front, the senior’s scheme of non-filing of return is hardly anything to write home about, if you have a meagre rental income or non-tax-deducted Dividend/Interest income, you will still have to file a return.
But the “Faceless Tribunal Appeal” proposal is highly positive in my view.
The cess on agri products like some fruits, vegetables and fertilisers could have been easily avoided in my view.
One word of caution – if I leave out the last year, being an outlier in view of the COVID-19, the Revenue Expenditure is still 12% up from 2018-19 levels. There is a need for controls!
Looking at Goa, long ago in 2019 Budgets, the Centre provided some tiny amount for development of seventeen tourist spots (Colva was one). I don’t know how much we got and what we did with the money. This time we get 300 crores for our 60 years – I hope we will have plans say, for a good comfortable time-tabled city-bus system in Goa.
And in conclusion: It’s a tough going – we must grow, yes, but we must fast track equality, and that immediate oxygen as well to boost consumption. I think that’s one area which will be discussed at useful length by our representatives in the house! Let’s see!
(Binayak Datta is a Finance Professional)
