The big takeaway from the Union Budget 2021 was that there would be no new taxes.
Going in, there were broad expectations that Finance Minister Nirmala Sitharaman in her Budget speech would announce some form of tax increases, either only on the wealthy or all tax payers, with some emphasis on those investing in stock markets.
Both were linked to the massive wealth creation we saw in the second half of the last year.
After all, how could the government fill the gaping revenue hole left by COVID-19’s economic shocks and simultaneously ignore the rising inequity?
An Interesting Announcement: Census 2021 Will Be Entirely Digital
Incidentally, there was and still is a strong clamour for taxing the Ambanis of the world, whose wealth rose dramatically as the markets did even as many have stayed or gotten poorer.
That these tax increases did not happen, provided considerable relief to the stock markets, who were further buoyed by announcements like one which spoke of scrapping old cars — a benefit to auto majors — and overall increased outlays for infrastructure and health.
The BSE Sensex was on steroids for the day, rising 2,315 points or 5 percent to 48,601, though still below its all-time high of 50,000 hit on 21 January 2021.
There were other announcements around infrastructure investments including the (re) creation of a development financial institution.
Some of the specific infrastructure announcements were seemingly linked to the upcoming regional elections. There were other announcements on easing up tax procedures which were welcome. As was an interesting announcement that the forthcoming Census 2021 would be entirely digital. This would potentially mean that data and analytics could turn around faster, as opposed to years it took earlier for some cuts which in turn could mean more accurate policy making and responses.
The Positive Thrust The Economy Needs
One important lens with which to view this Budget speech is that it was delivered in the shadow of the COVID-19 pandemic. It did have the tenor of a ‘back to work’ statement rather than one that looked defensive or flailing because of the economic and health shocks in the last year.
The credit for this may or may not go to the government in particular, but the positive thrust is what the economy needs, quite desperately.
It does seem like we are no longer fighting in the trenches as many western economies still are. Rather, we are resuming where we left off.
Now where we left off was not exactly the most memorable of times, being that the Indian economy had gone from eight quarters of slowdown into a lockdown in the third week of March 2020.
Hopefully, we will continue to see a lower COVID-19 case count and fatalities, and the economic recovery that will follow.
Efforts To Privatise Public Sector: Hurdles
The Budget expectedly focused on health with higher outlays including for vaccines. India’s health sector needs more than money. The COVID-19 pandemic and the lessons thereof ought to trigger a fundamental reimagining of the country’s healthcare sector and the manner in which it is funded and delivered. And with a fresh look at private-public participation with potentially more private sector inputs in newer areas.
A Union Budget may not be the right place to expect it but a few hints could have perhaps come.
The money for the government’s plans will come not only from taxes as we know. It will come from moves like a Rs 175,000 crore divestment/privatisation target.
This includes companies like Air India, public sector banks, and an initial public offering (IPO) from insurance giant Life Insurance Corporation of India (LIC).
This is mighty ambitious no doubt, but also the point where the rubber might not meet the road.
The ruling NDA/BJP government tried hard to privatise Air India in its previous stint and failed.
Efforts to privatise public sector units inevitably hit multiple hurdles, including bureaucrats within the government, and employees of said corporations. The track record clearly shows that most disinvestment targets have not been met.
What Could Govt Have Done Differently This Time?
For a government that is in such strong majority in Parliament, failing to do so suggests other problems or flaws.
Which raises questions about what the government could do differently this time, in terms of executing its promises made in the Budget speech on 1 February 2021.
The answer to that is not very clear right now, but it may emerge in the coming months. On the other hand, something not happening (like higher taxes) can itself be a major source of relief, if not celebration.
(The author is a financial journalist and founder of IndiaSpend & BOOM. He tweets @govindethiraj. 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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