Finance Minister Nirmala Sitharaman has raised the expectations high by promising to deliver a ‘budget like never before’. Globally, governments are facing massive policy and operational challenges and are adopting unconventional measures to revive their economy.
Current Budget is expected to outline government strategy to revive the various segments of the economy from the severe slump caused by the pandemic. The government has a difficult task of managing the fiscal burden and alow recovery of the economy, which is expected to remain high not only for the current year but also for the subsequent years. Some things expected by the government are:
Set a realistic expenditure, borrowing plan
The government could start with setting up a realistic revenue receipt and deficit target, exclude off-budget borrowing and lay down a revised road map for fiscal consolidation. The monetisation of the deficit, borrowings from the overseas market by the central government leaving room for the state governments and private sector to borrow from the domestic market, disinvestment and asset monetization could be the probable avenues for raising funds this fiscal year.
Prioritise expenditure allocation
The government should prioritise its expenditure in three core areas — infrastructure, MSMEs and healthcare. Also, we expect the government to take measures to reduce the cost of doing business, enhance export competitiveness and place considerable thrust on education and skill development.
Create job opportunities
COVID-19 will lead to an uneven economic recovery across different sectors which will result in income inequality with low-skilled people being impacted more than high-skilled and high-paid employees, which is something the government needs to be mindful of. Thousands of workers are asked to work reduced hours or no hours at all. With fewer paid hours of work, median incomes are falling.
Addressing the needs of the upcoming sectors like renewable energy and healthcare and providing more incentives to employers to retain their employees at least for the next two years might help to reduce underemployment and create job opportunities. With COVID-19 accelerating the pace of digitisation and adoption of the fourth industrial revolution, a re-look at the skilling initiatives with respect to Industry 4.0 and making digitisation a mandatory skill development amongst MSMEs would be worthwhile.