A Recipe for Hope, Promise

Two of India’s greatest icons seem to have inspired Union Finance Minister Smt Nirmala Sitharaman in presenting the Rs 34.83 lakh crore Budget for 2021-22.

 

First, it is Guru Rabindranath Tagore’s “faith is the bird that feels the light and sings when the dawn is still dark” in Fireflies, a collection of aphorisms that was cited by Smt Sitharaman while presenting her first Budget, post-Covid 19.

 

 

 

The faith Smt Sitharaman referred to was in 130 billion-plus Indians that provided ‘hope and promise’ in tiding over the worst health crisis that the global community fought in our lifetime. This was nothing less than two World Wars fought in different parts of the globe for varied reasons.

 

Smt Sitharaman was right in invoking Tagore’s aphorism while she went about methodically unveiling her Budget plans to ‘rebuild, resurrect, reconstruct and revive’ a battered economy and put it on high growth swerve.

 

While resisting temptation of mopping up much needed financial resources through new taxes, she seems to have taken guidance from Tamil poet saint, Thiruvalluvar.,who once stated “A ruler is the one who creates and acquires wealth, protects and distributes it for common good,”.

 

 

Accordingly, the Finance Minister gave a big push to wealth creation through her pragmatic economic policy formulation of not levying new taxes on individuals, corporates or service providers that have had faced harrowing time during Covid-19.

 

In fact, she referred to the spectacular Team India’s cricket series win against Australia while pointing to Indians ‘abundant promise and unsuppressed thirst to perform and succeed’ in adverse times.

 

As the editor of a financial daily commented, Smt Sitharaman neither exhibited the flamboyancy of Rishabh Pant nor doggedness of Cheteshwar Pujara. She presented the Budget displaying a judicious blend of aggression and caution that is more a style of Ajinkya Rahane.

 

Borrowing and spending may not have come naturally to Smt Sitharaman coming from a conservative family. But, the élan with which she presented one of her defining Budgets in most trying circumstances paled Palaniappan Chidambaram’s 1997-98 acrobatics that were hailed as ‘Dream Budget’.

 

 

 

Her spending commitment on infrastructure projects at Rs 5.54 lakh crore and a whopping Rs 2 lakh crore set aside for capital investment need particular mention for more than one reasons. This massive thrust on infrastructure would not only rev up the investment cycle drawing in both foreign and domestic investors but also create millions of new jobs.

 

There’s no denying that jobs were lost during the year-long pandemic. From daily wagers to blue-collared ones, people have either lost completely or in part their livelihoods. While some have returned to work in last couple of months, thrust to create new work opportunities is what Smt Sitharaman seems to have attempted.

 

Established economic principle is that Rs 1 crore investment would lead to at least four new jobs. Infrastructure and capital investment commitment alone will lead to 30.16 lakh jobs. Cumulative impact of reviving smaller ancillary businesses is an addition.

 

Second big aspect is the focus on rural economy, agriculture and over 800 million farmers and their families. With a clutch of over a dozen proposals that entail Rs 5 lakh crore push in farming and rural economy, Smt Sitharaman tells the world where the Modi government’s heart beats. This does not include the Rs 16.4 lakh crore agriculture credit that’s being made available next fiscal.

 

In the process, the Finance Minister dispelled lies that Minimum Support Prices given to farmers were being disbanded and mandis disbanded. She displayed unusual aggression while making her point on how MSP on rice, wheat and dals (pulses) saw manifold hike in 2015-21 unlike the previous UPA government.

 

 

Unabashedly, she nailed Opposition parties’ lies and farmers’ agitation that was put up in last two months as an excuse to take on the Modi government.

 

Most of her proposals from agriculture infrastructure development fund, PM Kisan Samman Nidhi, rural irrigation, e-mandis, micro-projects, fertilisers subsidy to five fishing harbours would create jobs for rural people and pull them up on economic value chain. Effort seems to have been made to put more money in farmers’ pockets, allow them to spend and invest as well as hasten up government’s set target of doubling their income by 2024.

 

Funds commitment to rural areas and agriculture seem most sensible and timely given the resilience displayed by these sectors during the last one year keeping the economy on move. Even in next financial year, agriculture sector has the potential to grow at four per cent and there by contribute big time to economic upswing.

 

Third area is the big push given to railways by Smt Sitharaman. She has committed a humungous Rs 1.1 lakh crore and power sector revamp that comes with a price tag of Rs 3 lakh crore. Creation of new infrastructure with a total spending of Rs 2.2 lakh crore will again add to creation of large number of jobs and turn railways into engine of economic growth. More importantly, it would put railways on next level to host high speed rail services and freight movement.

 

With regards to power sector investments, one needs to keep his or her finger crossed given the opportunities lost during last two decades given the inertia to reform. Unless power sector transforms, it will not be able to support the huge energy demand due to projected nominal GDP growth of 14.5 per cent and actual growth of 11 percent estimated for 2021-22.

  

Record spending of Rs 4.78 lakh crore on defence with focus on new capacities, emergency acquisition of weapons, aircraft and missiles needs to be seen in backdrop of the face off on Eastern Ladakh front and proxy war sought to be raged on northern front by India’s adversaries.

 

Healthcare spending of Rs 2.23 lakh crore, a record post-Independence, is significant from medium term perspective. Given that primary healthcare, dealing with health emergencies, hospitals on the move have been given primacy, the renewed focus on this sector would help in providing services at affordable rates in a reliable manner.

 

What seems to be the running theme in the entire budget, four mini-budgets of sorts unveiled during the pandemic is achieving self-reliance or aatmanirbharta in a country that has been subjugated to import dependence, a folly fostered on India owing to the Nehruvian economic model.

 

In the four preceding Aatmanirbhar Bharat packages that were rolled out, over Rs 27.1 lakh crore that translate to 13 per cent of GDP was committed.

 

Heavy spending to achieve double digit growth and expand the economy quickly to $5 trillion by 2024 has had its pitfalls as well. Fiscal deficit has hit the roof, i.e. 9.5 per cent this fiscal and possibly it has been estimated to be 6.5 per cent in 2021-22. Hence, the cautious and painstakingly achieved economic prudence has been abandoned at least for the time being.

 

Several global media organisations still described Smt Sitharaman’s Budget as a wee-bit stingy in spending at $500 billion. Indian spending has been juxtaposed with European Union committing $900 billion and US expenditure budget of $1.9 trillion.

 

Numbers aside, what may still become a sticky issue is the move by Smt Sitharaman to sell the family silver to mobilise funds. Aggressive disinvestments may not be acceptable to all.

 

 

Swadeshi Jagaran Manch has already sought reconsideration of the move to sell two banks, one insurance company, list LIC on bourses, monetise gas pipelines and transmission networks to fund development projects. Reportedly Bank of Maharashtra, Punjab and Sindh Bank would be sold to private or foreign banking institutions. This is in addition to IDBI Bank and BPCL.Through LIC public issue alone, over Rs 1.75 lakh crore were to be mobilised to fund an expansionist and ambitious Budget. These are over half a dozen large companies, including BHEL that was once considered jewel in the crown, put on the block. Air India was anyway expected to be sold by September this year.

 

While funds mobilisation means sans hike in taxes may come under closer scrutiny, putting every penny to work for India’s prosperity plugging pilferage may be the biggest challenge.