Viewpoint: A Growth Oriented Budget

31 JAN,2021 | MEDC


 

India has managed to navigate the pandemic in almost a visionary manner. There is much to learn, for many emerging economies, about how we have handled this black swan event. At the same time, we cannot afford any complacency. Growth has become a real concern, if our economy is to emerge successfully from the pandemic.Fiscal deficit reduction is necessary, but it should take place only gradually, as government spending should not be drastically cut under the circumstances. We are witnessing a tight balancing act between growth and various fiscal constraints. Strategic government spending is inevitable, whether it is for a vaccine rollout, employment generation, or strengthening the financial sector by empowering PSBs to withstand a possible NPA shock. The MSME sector is the growth engine of our economy, and it has been badly affected by Covid. It needs special sops to be able to bounce back to its pre-pandemic performance levels. With the new classification, almost 99% of Indian industries are now categorized as MSMEs, and so the issues they face need to be addressed thoroughly in the Budget. With the government needing to bring back animal spirits into the economy at the earliest, no one should expect this to be a year of subsidies and concessions. Tax collections are not expected to be high this year, but GST (at a lower rate) should be imposed on more items and products in the economy. The tax base should be widened to the extent possible, as that will mean that the government is serious in bringing about social justice, especially as far as the middle-class is concerned. The pandemic has led to a widening of socioeconomic inequality, and in reigniting the growth process, this important fact needs to be considered. Atmanirbhar Bharat is a praiseworthy objective, and attaining it will necessitate paying more attention to the development of infrastructure and manufacturing processes that focus on Make in India If we are genuinely to be vocal about local, import-substitution will have to be seriously considered in the Budget. At the same time, foreign investors should not get the impression that India is an inward-looking economy. A fine policy balancing act is involved here, wherein we maintain our economic independence but still convince the world that we are a cost-effective country to do business in. On the whole, India’s economic recovery has been faster than expected, and the Budget should support that process. Our vaccination programme has become a role-model, not just for South Asia but for the entire world. In the same vein, our policymakers need to deliver a Budget that inspires the emerging economies everywhere. For obvious reasons, healthcare is an area deserving special attention henceforth. The Budget will also need to find some way to narrow the growing digital divide in the country, and thus to bring about inclusive and sustainable growth.  

*Photo Credit: Google

 

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