What is really needed out of Budget 2021 to revive the Indian economy?

The Union Budget 2020-2021 is turning out to be the most high-profile and highly awaited one. The Economic Survey expects the Indian economy to grow by 11% in real terms (adjusted for inflation) during 2021-22. This is close to the growth of 11.5% forecast by the International Monetary Fund (IMF).

The major aspects that the Indian economy is looking forward to are:

  • Empowering the Manufacturing Sector
  • Boosting the domestic consumption of durables
  • Refinancing via COVID-19 Bonds
  • Strengthening Public Investment

Government expenditure is a critical component for driving demand in the economy. The Central Government’s total spending, however, has been similar to the previous financial year and the state government finances are already overleveraged. Thus, the objective of the upcoming budget must be to step up spending through innovative means.

The Indian economy already created its image for 2021 by serving the entire world with COVID-19 vaccines manufactured by Serum Institute of India and Bharat Biotech. India is now looking to the February 1 budget for measures that will support the nascent economic recovery.

The Indian economy is looking up to:

  • Fiscal consolidation
    A new roadmap for consolidations needs to be drawn to prioritise growth as one of the current investments.
  • Bolder measures to raise funds for stimulus
    Moves such as partial monetisation of government borrowing as well as big-ticket privatisation and divestment should also be considered.

  • Support for the banking system

    As banks may be facing higher NPAs during the Coronavirus pandemic, there is a need to create a framework to deal with the NPAs, possibly a bad bank or AMC, and also dilute government shareholding in PSBs and create a bank investment company for PSBs.

  • Allocate more funds for rural schemes

    The focus should be on ensuring bigger capital allocation for rural schemes and to promote farm-to-fork locally to boost agricultural incomes.

  • Direct support measures for stressed sectors

    The aviation and services industries need a hand to get through the crisis through tax concessions and equity support.

  • Universalise PDS

    This should be done for at least for a year to give free/cheap food to the jobless and vulnerable.

  • No new cess or tax to meet COVID-19 expenses

    An increase in taxes will eat into what are already lower incomes. The hike in taxes will also dampen demand. Reversing tariff protections taking measures to make industry competitive should also be considered.

The biggest concern of the Indian economy is its increasing demands with respect to its growth. At the same point in time, the people of the economy need jobs and more jobs.

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