Privatisation Move Fulfils a Long-Pending Demand: Neelkanth Mishra

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Video Editor: Ashutosh Bhardwaj

Finance Minister Nirmala Sitharaman had promised a “Budget like never before,” but can the government deliver?

With a battered economy at hand and criticisms of being prudent during the time of the crisis, with Union Budget of 2021, the government has indicated its intention to privatise and focus on growth.

While some are lauding the government’s propositions, some say that the Budget is still fiscally conservative. The Quint spoke to Neelkanth Mishra, MD, India Strategist and Co-Head of Equity Strategy, Asia Pacific, Credit Suisse to understand his takeaways from Budget 2021.

Here are some excerpts from the interview:

Can we see an ideological change in Budget 2021?

The intent to privatise was visible from last year, when on 15 November, the government had announced production linked incentive (PLI) schemes for electronics and pharmaceutical sectors and had committed to spending Rs 1.46 lakh crore of funding in in a bid to boost local manufacturing. This has never happened before. So it became evident that the government wants to spur growth at any cost. This, in my opinion, is a good development because growth can solve a lot of problems that the economy is facing currently.

When we evaluate the propositions made in this Budget, it shows that the government is aware of its limitations.

For example, if they increase MNREGA wages that will definitely pump money into the economy, but then what will be the impact of that move on the rest of the economy like urban-rural migration, worker availability and inflation? The government appears to be acknowledging these factors and spending wisely while depending on the private sector to increase enthusiasm and increase investments. Keeping all these factors in mind, I think the government privatised growth, which is the most important aspect of this Budget.

The government has been criticised over its fiscal conservatism initially. But in the Union Budget, Finance Minister Nirmala Sitharaman told us in her Budget speech that 2020-21 will end with government expenditure growing by 28.4 percent. How do we read this?

In the past few months, everybody was criticising the government for not spending enough, they assumed that perhaps the government was intimidated by rating agencies or worried that it will weaken the rupee. It seems that the government was not worried about that, or if they were they’re not anymore. When you impose a lockdown on the economy, then a stimulus shouldn't be in the offering, instead what should be ensured is that people don't face hardships, people aren’t left hungry. What will be the impact of the fiscal stimulus on growth? Growth couldn’t have been the priority in the lockdown. When the economy opened up, that's when the government made the decision to spend more.

What does a rating agency evaluate? Debt sustainability that is whether or not the debt can be paid off. If you won’t have a GDP growth, then the debt won’t be sustainable anyway. How would the government then spend on other areas such as health care?

Many people are finding that the Union Budget is missing structural reforms, how do you look at it? Do you think it can convince the private sector to invest more?

Private sector businesses take decisions based on their own rationale. For instance edutech and event distribution companies have been investing even before the Budget. So, in a manner of speaking, there’s growth as well as investment. In terms of structural reforms, simplifying labour laws is one.

Seasoned politicians are also saying that the very mention of privatisation in the Budget is itself a big achievement. Even if some public sector banks get privatised this year, there won't be any near term benefits, but what this move signals is that government is set to fulfil a long-pending demand.