A futuristic Budget for a resilient, robust economy
FY2021-22 Budget presented by Union Finance Minister Nirmala Sitharaman is bold and realistic. The backbone of budgetary proposals is infrastructure, privatisation, and liberalisation.
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The Budget was based on 6 pillars. These were classified as Health, Manufacturing, Rural, Human Capital, Research & Development and Governance, which broadly covered not only the economic needs, but also social requirements. Overall, it was a futuristic budget, aimed at laying foundation for a resilient and robust economy to put India back on the path of a $5 trillion power house.
Health is wealth and that was the first item covered in line with the Prime Minister Modi's often repeated message of healthy people building a stronger nation. PM Atmanirbhar Swastha Bharat Scheme was introduced with an outlay of Rs 64,100 cr. stressing the role of clean air and drinking water in health management, schemes like Jal Jiwan Mission Urban and Clean Air Urban were talked about. Rs 35,000 cr has been marked for Covid Vaccine in FY22, reiterating the Government's commitment to provide free vaccine.
Manufacturing needs to grow in double digit for both 'make in India' and employment. Setting up of a Development Financial Institution with a capital outlay of Rs 20,000 cr for lending Rs 5 LCR in 3 years has been envisaged. This is considered necessary for long term infrastructure funding. One only hopes that learning from the institutions of past like ICICI and IDBI are not forgotten. The Bad Bank story heard for long is finally seeing the light of the day. An Asset Reconstruction Bank is proposed for NPAs. At the same time, for the capitalization of Banks, a chest of Rs 25,000 cr has been proposed. Banks will have to be watched closely so that they do not spoil the game again. At the same time, it is hoped that these banks would be asked to contribute towards the Bad Bank on a continuous basis.
Disinvestment is a big take away. Air India process has been committed to be completed in 2021. Besides, disinvestment of two public sector banks and one insurance company has been promised. IPO in LIC has been proposed. This Government is definitely moving away from doing business. Foreign investment is also encouraged by increasing FDI in insurance from 49% to 74 per cent and reducing residency requirement for NRIs to invest here.
This time Government has also not been shy of increasing custom duties to encourage 'make in India' and 'atmanirbharta', ignoring WTO.
Government expects to close the FY21 with a fiscal deficit of 9.5 per cent of GDP, threatening inflation. The projected fiscal deficit for FY22 is 6.8 per cent and by FY26 it will be brought down to 4.5 per cent. The Government has not been shy of the higher requirement of spending to boost the economy and has committed to amend FRBM Act to facilitate this.
The Budget did not talk enough on employment and individual tax-payers returned empty handed. But overall, it is an attempt to put the Mission Revival on track.
(Shiva Kumar is an ex-Managing Director of State Bank of Bikaner & Jaipur, and ex-President, Edelweiss Group)
