Budget 2021: Economic revival top priority, Modi Government plans to boost public spending

The Narendra Modi government is chalking a massive public spending boost in Union Budget 2021-22, which will focus on post-COVID economic revival and employment generation, Moneycontrol reported.

While the numbers are not finalised yet, one fact has been confirmed that upcoming budget will have the highest ever capital expenditure outlay from the central government. A senior official aware of the deliberations in the government said the budgeted capex for FY2021-22 could easily cross Rs 6-7 lakh crore. For 2020-21, the centre had limited its own capital expenditure at Rs 4.13 lakh crore, that has been raised by Rs 35,200 crore, announced by Finance Minister Nirmala Sitharaman in October and November as part of the various Aatmanirbhar Bharat packages.


As Finance Minister Nirmala Sitharaman and her team chart the course of the budget, the government finds itself not restricted by strict fiscal considerations. The 15th Finance Commission is learnt to have recommended a fiscal deficit target range for each year of its award period, till 2025-26, instead of a single number.

The fiscal deficit target for the current year set at 3.5 per cent of GDP. That target is no longer maintained as the COVID-19 pandemic has led to a drop in revenues and higher expenditure commitments for the central government. As per Moneycontrol analysts, economists and the private sector are asking the government to further boost public spending. This, they say will create demand and lead to revival across sectors.

Apart from capital expenditure, the upcoming budget is also aimed to substantially push the outlay for grants for creation of capital assets, health expenditure and money to states under certain schemes. In normal times, the biggest drawback of a swelling fiscal deficit is higher borrowing and wider debt-GDP ratio. However, the centre is not focussing on that front for next year. An expected GDP contraction this year, means a low-base effect for next year, which will lead to debt-GDP consolidation.

As reported earlier, the government has selected 50 projects from the National Infrastructure Pipeline into which it has decided to pump capital expenditure with an explicit intention of employment generation. Some of the 50 projects which have been identified include the Jewar International Airport in Greater Noida, Navi Mumbai International Airport, the Chardham Connectivity Highway project, JNPT port Terminal 4, Vadodara-Mumbai Expressway, Ahmedabad Metro Rail and the planned second Chennai Airport.

In a summit organized by news agency Reuters last week, Sitharaman had hinted that the government is planning a public spending boost in the upcoming budget. “I have to be conscious that if I don’t spend now, then the stimulus is meaningless; if I don’t spend now the revival is going to get deferred and we can’t afford that,” she had said.