Budget to bring economy back on track
It would not be right to judge this budget, presented after an unprecedented pandemic according to the general budgetary analysis. The general budget is criticized when the fiscal deficit increases. Though, the fiscal deficit was kept at 3.5 percent of GDP in the budget for the year 2020-21, and revised estimates put the same as 9.5 percent of the GDP; and it is estimated to be 6.8 percent of GDP in the coming year 2021-22, it can’t be or is not being questioned. Despite this huge fiscal deficit in revised estimates for current year and budget estimates for next year, there is no reason to criticize this budget, because this deficit in the current year is not due to wasteful expenditure of the government or due to populist policies, but it is due to government’s efforts to save the lives of the people who have lost employment, providing food and other material for their livelihood, and to bring the economy back on track, both agriculture and industrial. The fiscal deficit is due to provision of more funds for infrastructure, health and livelihood.
The reason behind keeping this fiscal deficit almost double than normal for the coming year is that there is a need to give a big support to the economy in view of the worst pandemic. For this, the allocation of more funds for infrastructure, the announcement of new infrastructure projects, efforts to rebuild the industries ruined by Chinese imports, unprecedented 137% increase in expenditure on health, allocation of additional funds for research and development (R&D). More resources have also been allocated to the states to deal with the extraordinary situations.
Despite being a developing country, the way in which India has been more successful than most of the countries in dealing with the pandemic, we can perform equally well in dealing with its economic effects. All such efforts are visible in this budget. Despite the pandemic, the government's focus on infrastructure did not wane. The performance of the current year in infrastructure development is nowhere less in any way. And this year too the huge increase in infrastructure spending in the coming year can be considered a welcome move. For the last three decades, there has been almost stagnation in health spending in the budget every year. Although the pandemic could be dealt with this year due to national resolve, the need to increase expenditure on health was felt for a long time. This year unprecedented increase in expenditure on primary health centers in both rural and urban areas, is welcome. Allocations for nutrition programs indirectly linked to health, and provision of Rs 2.8 lakh crore for five years for clean drinking water can be a game changer.
Production linked incentives worth Rs 1.97 lakh crore are a major step to promote manufacturing for self-reliant India, many of which had already been announced. The long-term financing institutions were demolished in the obsession for the new economic policy. An attempt has been made to rectify this mistake in the budget this year, and the provision of a share capital of rupees 20 thousand crores has been made for setting up a long-term development financial institution (DFI), which is a welcome step.
Due to all these efforts, the capital expenditure in the current year has reached Rs 4.39 lakh crore in the revised estimates, ag against the budget estimates of Rs 4.12 lakh crore. As compared to this, an allocation of Rs 5.54 lakh crore for capital expenditure in the coming year is a significant and welcome provision. Provision of capital expenditure of 1.08 lakh crore rupees for roads, apart from provision of capital expenditure of 1.07 lakh crore rupees for railways, efforts for metro, waterways, water supply petroleum and natural gas can be said to be commendable.
The announcement to carry forward the controversial decisions of disinvestment this year is a matter of grave concern. In the past as well concerns had been raised about the disinvestment of BPCL, Air India, Shipping Corporation of India, Container Corporation of India, Pawan Hans, etc. The government should reconsider its proposal of the privatization of two public sector banks and one insurance company, about which concerns are being raised. It is better that instead of making strategic disinvestment of these institutions, their shareholding should be sold to the common people in the long run, after improving their performance. Though there is no problem in selling unused land or assets for the nation building, but selling assets which have been built from the hard earned money of tax payers, to fill revenue deficit in the past, in the name of strategic disinvestment is not a correct policy. Their divestment, through equity route would be a far better option, after improving their performance.
On the other hand, raising the FDI limit in the insurance sector from 49 to 74 at present is also a matter of concern. It is no good to increase foreign dominance in the financial sector. This increases foreign dominance over the financial resources of the country and affects the development of the country in the long run. The government needs to reconsider this step.