Viewpoint: Budgetary Expectations

30 JAN,2022 | MEDC


 

  • Given the socioeconomic devastation wrought by the successive waves of the pandemic, the central theme of the Budget needs to revolve around large scale employment generation at the bottom of the pyramid. India cannot afford to have any more jobless growth. Capital, labour and land acquisition continue to pose problems, as does regulatory red-tape. The Budget should therefore make a start on jobs-first reform programme … one which addresses the structural constraints that continue to plague the labour-intensive sectors of our economy. Covid has led to widespread economic distress at the lower ends of the income distribution in India, and that needs to be addressed on a priority basis.
  • MSMEs are the backbone of Indian industry, and they now need a helping hand from the government. They need to be adequately equipped to cater to changing customer requirements, while simultaneously enabling them to thrive in today’s rapidly evolving digital landscape. The challenge for Indian policymakers is to strengthen the domestic recovery at a time when the global economy is slowing, and focus relentlessly on macroeconomic stabilization.
  • A key focus area of the Budget needs to be infrastructure development, with higher allocation to roads, railways, and other modes of transportation, facilitating seamless connectivity across India. Extending tax cuts for new manufacturing units, as well as rationalizing import duties and tariffs is another priority area. The travel, tourism and MICE industry, which is one of the sectors hardest hit by Covid, also needs tangible support. Any boost to consumption or a tax relief will be most welcome. So are sops to boost investment, including liberalization of FDI norms in real estate, which will allow increased investment in residential and rental housing, and improve the demand-supply gap.
  • The Budget must also accept that, given the tightness of government finances in the post-pandemic era, a fair amount of the planned infrastructure development will need to be financed from private sources. With domestic private capital not being easily available, it is global capital that needs to be strategically tapped. Enticing the international investor community to India will necessitate lowering transaction costs, and enhancing the ease of doing business within the country, including easing KYC norms for corporates and business firms. In this context, policymakers should also not forget the importance of city planning. Maharashtra is the most urbanized state in India, and it stands to gain a lot from the right kind of policy thrust on urban infrastructure development.
  • Ultimately, ensuring that the economic recovery is broad-based, with the livelihoods at the bottom of the pyramid receiving particular attention is the responsibility of fiscal (and not monetary) policy. Covid has imposed a new-normal upon us, and in continuation with the Government of India’s policy on inclusive growth (Sabka Saath, Sabka Vikas), there is a need to focus strongly on the development of agriculture and allied sectors of the rural economy. The Union Budget is an opportunity to shift the behavior of economic agents in the direction of inclusive and sustainable growth.

*Photo Credit: Google

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