A Budget that ticks all the boxes

S Vaidhyasubramaniam | Updated on February 07, 2021

Finance Minister gets full marks for an ‘Atmanirbhar’ Budget

The Union Budget 2021-22 has again kick-started India’s growth trajectory with its economic four-stroke engine steaming with positivism, transparency, quality and quantity. As an academic, I see this Union Budget as a comprehensive question paper for all subjects with multiple choices as solutions for growth and development.

The duration of the question paper was well within the time limit and did not exceed as it did last year. Language had the clarity in content, transparency in intent and the completeness in the Thirukkural couplet. The historicity captured through various milestones, the trans-geographic policy beneficiaries across all States, NRIs and global investors make the history and geography ride an easy cruise. The amalgam of Sciences was reflective in the action-reaction law through Budget reforms, litmus test through the expansionary policy based on capital formation and asset creation and the care of environment, both its flora and fauna through agriculture and environment related Budget announcements.

An academic’s nightmare, Mathematics will be easy if the probability of growth and development success is collectively increased by the coordinated action of all Ministries. We must realise that the Budget can never be the panacea for all policy lacunae in other Ministries/Departments. The success of the Budget lies in the right mix of Budget catalysts along with the Ministerial policy ingredients that can initiate a chain of reactions creating brisk economic effervescence.

The recent Budget has laid down the pedestal for growth and the need for coherent synergy across various Ministries for Atmanirbharta and $5 trillion GDP to become a reality. More on the numbers and the way forward.

Transparency scores high

The Finance Ministry must be complimented for the transparency with which the Budget has been presented and shared. The Finance Ministry’s GDP growth at current prices is estimated at 14.4 per cent while the Economic Survey pegs it at 15.5 per cent. With private investment gloomy due to Covid turbulence and already low during pre-Covid times, the Keynesian lead the government has taken is no surprise.

That the leadership pathway has been through capital asset creation and not consumption is visible in the Budget allocation for capex. The ₹5.5 lakh crore allocation for capex is 30 per cent more when compared to the 2019-20 actuals which needs to be the base year instead of RE 2020-21. The expenditure allocation spread across ministries and schemes seems to be driven by quality than populism with Defence (as usual), Food & Public distribution, Rural Development, Road Transport, Highways, Railways & Communications along with Agriculture & Jal Shakti ministries constituting upto 50 per cent of the total ₹34.83 lakh crore expenditure estimate and the major schemes — MGNREGS, PM-KISAN. Jal-Jeevan, National Health and Education receiving 60 per cent of total scheme-based Budget allocations of ₹4.2 lakh crore. Both have a balanced mix of critical sectors with a such genuine intent to invest on capex and a positive signal to the States and private players to create infrastructure and capital assets along with consumption growth.

On the receipt side, the estimated total receipts without borrowings of ₹19.76 lakh crore is supported by a 7 per cent increase in tax revenue and a whopping 87 per cent increase in divestment proceeds when compared to base year 2019-20. The reduction in non-tax revenue is understandable due to the Covid hit on profitability which is poised for a strong bounce back in the next two years. The record GST collections on the eve of the Budget, positive GDP growth, privatisation and asset monetisation plans and the cheering stock market gives a silently confident impression that the Budget is underestimating revenue with a possible over performance on delivery. The estimated borrowings to fund the deficit of ₹15.07 lakh crore might look concerning. The FM’s path for fiscal consolidation by 2026, the quality of spend for record high and revenue possible capex which is the highest as a percentage of GDP in the last decade is a clear signal for coherent synergy. To begin, the Ministry of Education should synergise with the Finance Ministry on the previous Budget announcement regarding the elusive foreign currency loan access to educational institutions.

The Budget question paper has provided multiple choices for correct answers. ‘All of the above’ is also one choice. If all Ministries get their policy plans right then ‘all of the above’ is the right choice.

The writer is Vice-Chancellor & Tata Sons Chair Professor, SASTRA Deemed University. (Views are personal)

Published on February 07, 2021

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