Union Budgets always send the adrenalin through the roof. Though they no longer have the intensity and expectations of the Good Old Days, Budgets do have a buzz around it, specially, the Union Budget. At one time, the Union Finance Minister used to present the Budget in the evening, in keeping with a tradition that was meant to help the British Raj back in London to hear and watch it ‘live’.
The Budgets started losing their impact and importance because policy decisions were taken by successive governments, all through the year. With the advent of GST, taxes that were announced during Budgets and made a difference on prices of Fuel and Cigarettes, Televisions to Cars, no longer mattered. But the reading of Union Budget in Lok Sabha, still has its charm. The build-up in media, the halwa ceremony, and the arrival of the Finance Minister in Parliament – all have the elements, custom made for television audiences.
Everyone has their expectations from the Union budget – the Poor, the Rich and of course, the favourite of every Finance Minister, the loyal tax paying salaried middle class.
This budget will be different in more ways than one. It comes at a time when the country is emerging out of a year-long lockdown that sent the economy into hibernation, a trend that was observed world-wide. The Government did its best in the months when the nation went into a strict lockdown that saw almost every sector shut down operations, rendering millions unemployed. The free ration scheme ensured that no one went hungry and it should be said without hesitation that the state governments too played their role admirably in implementing the central government programmes.
While the big manufacturing companies including Automobile, Consumer Durables and Steel shut down operations from April 2020 onwards, sectors like Construction saw large scale migration of its workforce, forcing a complete shuttering of its projects. The Micro Small and Medium enterprises, the bedrock of our country’s manufacturing sector, was the most badly hit as they saw orders dry up from bigger companies upstream. The cash crunch was the biggest issue and Ministry of Finance and Ministry of MSME stepped in with a moratorium of loans and infusion of cash. Central Govt undertakings were asked to clear payments of bills that were due to MSMEs. Slowly, the sector turned around and many state governments chipped in with localized incentives like waiving of fixed costs of power bills. Banks, prodded by Supreme Court set in a process of moratorium of loans and that too helped.
As was in the way GST collections picking up post October 2020 and that is an indication of manufacturing sector is picking up steam in commensurate with demand. GDP which is estimated to contract to 7.7 pc in current fiscal year ending March 31, but IMF projects 11.5% GDP growth for India in 2021.
The economic survey gives an indication that there is likely to be Increase in public healthcare spending from 1 pc to 2.5-3 pc of GDP can decrease out-of-pocket expenditure on health from 65 to 35%. Healthcare must not beholden Salience bias, and healthcare infrastructure needs to be agile. Tech enabled solutions needs to be harnessed to the fullest for last mile connectivity.
The general government debt for FY20 is taken as 73.8 per cent of the GDP. The primary deficit for FY21 is assumed to be 6.8 per cent of GDP and primary deficit for FY22 is assumed to be 2.5 per cent of GDP.
According to the Economic Survey, the declining trajectory of primary deficit is assumed to reach 1.5 per cent of GDP by FY24, and it is assumed to stay at 1.5 per cent thereafter. Besides, the survey cited that nominal interest rate is assumed to be 6 per cent. As on January 26, 2021, estimate of the weighted average cost of borrowing using the weights of general government borrowing across maturities to be 6 per cent. Inflation is taken as 5 per cent, i.e. mid-point of the range of 4 per cent – 6 per cent.
All in all, the budget being presented on 1st of February 2021, will mark a change in policy, than sheer numbers. Watch this space.
