In a usual year, the Union Budget is loaded with expectations from all quarters — common citizens, industry, governments’ coffers, and investors. This year, under pandemic circumstances, there was an additional expectation from the Union Budget (2021-22) — to show India the way forward — after fighting a year of myriad challenges.
The COVID-19 pandemic brought with it unforeseen circumstances and difficulties: an overwhelmed healthcare infrastructure, uncertainty surrounding jobs and wages, and the growth trajectory taking a hit.
However, India stepped up to the challenge and used this crisis for structural reforms, and started preparing for growth revival since the very beginning of the pandemic. The sharp recovery is testament to this pursuit.
Today, the Union Budget 2021-2022 has been built on these initiatives with the Atmanirbhar Bharat Mission as its raison d’être. To have not only met this task, but to have exceeded additional expectations is no small feat.
Indeed, the Union Budget 2021-2022 should be recognised for what it is — pragmatic, forward-looking, and aggressively moving towards accelerating growth, with a strategic vision and a clear action pathway.
Budget 2021-22: How Additional Increase In Expenditure Is Being Financed Via Innovative Means
The Economic Survey 2020-21 highlighted the importance of fiscal policy, and in particular, capital expenditures, to boost the economy, owing to the large fiscal multipliers that accrue from public investments. The Survey also pointed out that these multipliers have a greater effect when an economy is going through a slowdown or crisis.
This Budget has more than delivered on that front, with a 34.5 percent increase in capital expenditure over 2020-21. Provisions have also been made for an additional Rs 2 lakh crores of capital expenditure by States and Autonomous Bodies.
However, it is worth noting that this additional increase in expenditure is being financed through innovative means. The focus on raising non-tax revenues through asset monetisation is a major step. By creating an asset monetisation pipeline and a dashboard to monitor progress, a major impetus has been given to raising funds through asset monetisation. This is a prudent move, considering the impact of COVID on tax revenues.
Roads with an enterprise value of Rs 5,000 crores are being transferred to the NHAI (National Highways Authority of India) InvIT (government-sponsored Infrastructure Investment Trust).
Similarly, the PGCIL (Power Grid Corporation of India) will also transfer Rs 7,000 crores to the PGCIL InvIT. Assets such as the NHAI operational toll roads, transmission assets of PGCIL, AAI airports in Tier 2 and 3 cities, railway infrastructure assets, warehousing assets of CPSEs (central public sector enterprises) and sports stadiums will also be rolled out as part of the Asset Monetisation Programme (AMP). The disinvestment target of Rs 1.75 lakh crores sends all the right signals to investors as well.
Govt Exits Areas Where Private Sector Has Shown More Efficiency: A Strong Signal
Perhaps the greatest signal sent to the world is that the Government of India has shown a proclivity to exit areas where the private sector has proven to be more efficient and productive. By announcing the disinvestment of two public sector banks, a strong signal has been sent that India is willing to take tough decisions to boost growth.
The raising of the FDI limit from 49 percent to 74 percent is yet another example. These moves highlight the fact that the government is committed to promoting private sector-led growth.
In promoting private sector-led growth, our millions of MSMEs (Micro, Small and Medium Enterprises) will play a critical role. Through announcing a move to rationalise and reduce customs duties on key raw materials, our MSME sector stands to benefit immensely as well. The reduced costs of raw materials will make their products more price competitive, and will lead to greater output and employment in this sector. The government, by not tinkering on the tax rates and exemptions, has signalled stability and focus on staying away from populist measures that hurt growth prospects in the long-run.
Importance Of Human Capital In Driving Growth
The importance of human capital in driving growth cannot be overstated, especially in light of the past year. Experts have long called for increases in health spending to boost India’s outcomes. A new Centrally Sponsored Scheme (CSS), the Pradhan Mantri Atmanirbhar Swasth Bharat Yojana, with an outlay of Rs 64,180 crores over 6 years has been announced to develop capacities in primary, secondary and tertiary health systems.
Taking a holistic view of wellness, investments have also been increased in waste management, reduction in air pollution, and provision of drinking water supply.
With these initiatives taken together, the combined health and wellness expenditure has risen by more than 137 percent this year, as compared to the previous year.
Clearly, this signals the sharp focus of the government on improving health and wellness outcomes.
The other pillar of human capital is education. As was noted in the Union Budget 2021-22 speech, the National Education Policy (NEP), was well received by all stakeholders. To give further impetus to the implementation of this policy, it was announced that 15,000 schools would be strengthened to include all components of the NEP.
The Budget 2021-22 also announced that the Higher Education Commission (HEC) would be set up in India this year. The implementation of the National Research Foundation, with an outlay of Rs 50,000 crores over 5 years, will ensure the strengthening of India’s research ecosystem as well.
A Clear & Accurate Diagnosis Of The Indian Economy — And The Road Ahead
This shows that the Union Budget 2021-22 undertook a clear and correct diagnosis of the Indian economy:
- increase investment and employment
- clear the deck for new financing tools
- bring in efficiency
- provide stability for a strong recovery
- further invigorate human capital development
This translated into laser-focus on capital expenditure for infrastructure creation, while funding it through tools ready to be tapped — asset monetisation and disinvestment.
The Budget has also cleared the path for unleashing private sector-led initiatives, while moving away from undertakings where it has no business to be in the first place.
Lastly, human capital formation rests on the National Health Policy, National Education Policy and National Research Foundation.
The reforms in education and infrastructure creation, investments in urban Jal Jeevan Mission and Swachh Bharat Mission, and resolving the issues of public transport and air pollution are certainly steps in the right direction.
This demonstrates that innovation in thinking and governance can help nations come out of any crisis.
In providing the path ahead for India, we may have also shown the world how developing nations can overcome the COVID crisis and economic uncertainty.
(Amitabh Kant is Chief Executive Officer, NITI Aayog. He tweets @amitabhk87. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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