Budget-2021:Role of Union Budget in Revamping the Economy

By Devesh Arora.
New Delhi. A government budget is an annual financial statement which outlines the estimated government expenditure and expected government receipts or revenues for the forthcoming fiscal year. It is one of the key components of Fiscal Policy of any government. The Indian Finance Minister, Nirmala Sitharaman presented the Union Budget for year 2021-22 on 1st February 2021.
It would be a mockery to introduce you all to the recent pandemic and the impact that it had on the Economy. Thus, the gravity of this particular budget cannot be underestimated.
According to the FM, Budget 2021 proposals rest on six pillars —health & well-being, physical & financial capital & infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation & research & development, minimum government and maximum governance.
Firstly, an increased capital expenditure on Healthcare and education will contribute to a better Human Developmental Index and thus, sustainable long growth for the economy. Increased Capital expenditure by 130% is truly one way to see a pandemic as an opportunity to be monetised and foster economic growth. Revival of these sectors will restore employment to millions of unemployed due to the pandemic.
As per a recent study by Punjab University, when we compare ourselves to our neighbouring country Bangladesh, we have always found that despite of much higher spending on healthcare, indexes like Infant Mortality Rate, Death Rate etc. are better there. The primary reason found was more spending on preventive techniques like vaccination, general fitness etc. by Bangladesh. On the other hand, Indian Policy makers’ focus was more on developing for cure. A close & detailed analysis of this budget reveals that India will be following a similar trend through increased capital expenditure.
India is one country where there is a lot of scope in R&D, establishment of central university in Leh, Ladakh and increased funds to similar institution in this budget will help in boosting the R&D sector of this country.
When it comes to financial infrastructure, I would not hesitate to call it an ‘Investor friendly Budget’. The proof of which can already be seen by a plunge in the stock markets. DDT was already abolished and continues to be in this financial year. Besides, NRIs are also facilitated to start One Person Companies in India to stir foreign Investment. The increased limit of FDI from 49% to 74% in Insurance sector is another positive in terms of attracting FDI. Besides, government’s plans to monetise assets worth 1.75 lakh crores also open new ventures for investors. Increased focus on sustainable energy sources like hydrogen and solar energy can also prove to be lucrative for retail investors.
Transportation infrastructure is the pipeline of any economy. Both national and inter state infrastructure lies in the center of this budget with increased road and rail expenditure on routes that connect economic corridors in various states. Metro Rail projects in Chennai, Nagpur etc. will also see a boost in their phase two. The government has also planned to invest 18000 in development of the buses. Thus, the transportation has been fairly looked at.
Government has also planned to reduce duty on raw material and an increase on imports of finished goods like electronics. This will ease production in the country and realise the dream of Aatma Nirbhar Bharat.
In total, FM has pegged fiscal deficit for the coming year 2021-22 at 6.8% of GDP and aims to bring it back below the 4.5% mark by 2025-26. An increase in the fiscal deficit, in theory, can boost a sluggish economy by giving more money to people who can then buy and invest more. However, they do question long term stability and growth for any economy and similar concerns rise for India too with the budget in deficit for many years now.
On the negative side, certain sectors like Hospitality and Tourism which have been deeply impacted by the pandemic have not received the expected attention.
Overall, the budget brings optimism for coming years and will play a positive role in revamping the economy out of the pandemic. Let us hope for a transparent implementation and allocation of the underlined finances.