India, in all probability, is expected to end ‘technical recession’ when it unveils GDP numbers for the October-December quarter on February 26, nearly four weeks after the Union Budget for FY22 is presented.

FY21 has been a once-in-a-century kind of fiscal year, when all estimates/projections or Budget numbers lost their relevance. Let us look at various economic indicators: the Indian economy entered into recession for the fifth time, but for the first time after GDP data began to be announced on a quarterly basis.

The government moved its highest ever supplementary demands for grants with gross additional expenditure of over ₹2.35 lakh crore, with net cash outgo of around ₹1.67 lakh crore. PMI indices dropped to single digits, while contraction in the industrial sector touched 57.3 per cent.

Additional borrowing was almost 50 per cent of what was estimated in the Budget. Nearly ₹30 lakh crore in economic stimulus (both from the government and the RBI) has been announced till date, while FY21 Budget size was ₹30.4 lakh crore.

Shoots of recovery

Theoretically speaking, FY21 has seen two Budgets.

This fiscal also saw a different kind of battle on the GST front. Collection was down, so demand for compensation jumped manifold. The initial estimate is, there could be a shortfall of ₹3 lakh crore, out of which only ₹65,000 crore is expected to be met through compensation cess. The Centre asked States to borrow to meet the shortfall, and the States in turn asked the Centre to borrow. The tussle continued for a couple of months. Finally, the Centre said it will borrow and transfer back-to-back to States. All 28 States and three Union Territories (with legislature) on board agreed. Interestingly, GST revenue is also seeing a rise of over ₹1 lakh crore.

Now, look at the direct tax collection — it is also showing some signs of recovery. Advance tax collection from companies for the December 15 instalment recorded a growth of 49 per cent, indicating prospects of better corporate earnings.

This has improved overall direct tax collection, where the dip is just 13 per cent now as against 22 per cent in the beginning of November. Other high-frequency indicators such as Purchasing Manager Indices for both manufacturing and services are in the expansion zone. Power generation growth is in the double digits, manufacturing has come out from the red, and industry registered second successive months of growth.

What is the way ahead?

Finance Minister Nirmala Sitharaman has already made her estimation about near-zero or a marginally negative growth during this fiscal.

This optimism got a further boost when RBI Governor Shaktikanta Das not just lowered the contraction for the fiscal from 9.5 per cent to 7.5 per cent, but also expressed confidence that a growth of 0.1 per cent in the October-December quarter and 0.7 per cent during the January-March quarter of FY 2020-21 is expected.

Economic Affairs Secretary Tarun Bajaj on Friday said he is hopeful of the Indian economy getting back on track soon, given the signs of sustained improvement, and that in the next fiscal year the size of the economy may cross the FY20-level by a slight margin.

Various agencies are expecting growth during the next fiscal.

Now, all eyes are on the Union Budget for FY22. Sitharaman has promised a Budget like “never before” as the government looks to steer the pandemic-battered economy and push growth. Industry captains are expecting more bold measures.

CII President Uday Kotak said that the industry chamber has suggested that Budget proposals focus on growth and, alongside, look at fiscal management from a three-year perspective. Aggressive disinvestment and monetisation of assets can augment government revenues at a time when tax revenues have fallen sharply, he said, suggesting that government expenditure should be prioritised in three areas — infrastructure, healthcare and sustainability.

Industry expectations

At the same time, another industry chamber, Assocham, has suggested a reduction in income tax rate for individuals, besides a full deduction of interest, at least in respect of one house.


In case this is not done, at least the limit of ₹2 lakh should be raised to ₹5 lakh for owner-occupied houses. Also, the five-year period for acquisition/completion from the year of borrowing should be dispensed with, it said.

PHDCCI president Sanjay Aggarwal suggested a 10-pronged strategy for the FY22 Budget — refuelling consumption and demand; encouraging private investments; front-loading of infrastructure investments; establishing DFIs to fund industrial and infrastructural investments; strengthening MSMEs; reducing the costs of doing business; ease of doing exports; increasing tax-to-GDP ratio; keeping agriculture and the rural sector at the forefront; and effective reforms in social infrastructure.


Though it is difficult to say what kind of “never-before-seen” Budget will be tabled, one thing is very clear — more funds are expected to be provided for health, rural development, defence and food and consumer affairs, as well as infrastructure sectors. As this year’s focus was on the development of vaccines and creating infrastructure for the same, additional funds will be earmarked for the purpose.

However, the big suspense will be on relief for the middle class, in particular, the salaried class.