Shifting gears with confidence

Tarun Bajaj
“You cannot cross the sea merely by standing and staring at the water”
-Rabindranath Tagore
This quote epitomizes the endurance, resolve and resilience shown by every Indian during a tumultuous year 2020. This spirit resonated in the recent performance of the Indian team with Australia with 36 all out to a resolute draw to an aggressive win! Union Budget 2021-22, rekindles this faith in the promise and potential of 130 crore Indians to perform and succeed. It is an earnest attempt to shift gears to ‘fuel’ the economy – a judicious shift in strategy from disruption to consolidation and now to acceleration.
Budget 2021-22 has been announced amidst a once-in-a-century global pandemic and following by a series of mini-budgets in the year 2020-21 – primarily focussed on cushioning the vulnerable sections, alleviating corporate distress and a continuum of reforms.
 Effective control of the pandemic with a robust recovery rate and declining daily new cases has receded the fears of a second wave. Akin to the advent of the COVID vaccine which ignites hopes on the health front, Union Budget, 2021-22 has shifted gears and delivers a booster dose on the economic front with an all-out thrust on investment and infrastructure spending.
Given the health sector taking centre stage due to the pandemic, the Budget, naturally, has enhanced the outlay by around 2.4 times as compared to last year budgeted outlays. More significantly, it focuses on a holistic approach towards health and well-being – developing institutional capacities in health care; improving nutritional outcomes via Mission Poshan 2.0; increasing availability of clean water and sanitation via JalJeevan Mission (Urban) and Swachh Bharat Mission; and reducing stress on clean environment in urban centres by taking measures to reduce pollution such as the voluntary scrapping policy to phase out old and unfit vehicles. An amount of Rs 35,000 crore has been provided for roll-out of the COVID-19 vaccine with a commitment to provide additional funds if required.
The Budget recognizes that the multiplier effects of public investment, especially in infrastructure, crowd-in private investment and raise the medium-term productive capacity and growth potential. Capital Expenditure budgeted outlay for FY22 has, accordingly, been raised by 34.5 per cent over 2020-21 (BE) – with a special focus on railways, roads, urban transport, power, telecom, textiles and affordable housing amid continued emphasis on the National Infrastructure Pipeline. This is besides the more than Rs. 2 lakh crore that will go to states and autonomous bodies with Central Grants. The capital expenditure of CPSEs that should also see a big increase than the current year will add up to the booster dose of infra spend.
To fund the infra spend, various innovative measures have been envisaged- new Development Finance Institution, public infrastructure asset monetization pipeline, PPP in urban transport and ports, debt financing of infrastructure investment trusts (InvITs) and real estate investment trusts (REITs), zero-coupon bonds by Infrastructure Debt Funds (IDFs) to finance long-term infrastructure projects and rationalisation of rules for international Sovereign Wealth funds and pension funds to invest in infrastructure projects in India, to mention a few.
The confidence to turn the ‘crisis’ into an opportunity is evident in sustaining the momentum of structural reforms. Various progressive steps for the financial sector, including single Securities market Code, privatisation of PSBs and General Insurance Company, setting up of Asset Reconstruction and Management Companies to address stressed loans of banks, ensuring adequate allocation for recapitalisation of public sector banks, promoting GIFT-IFSC as a world-class fintech hub and increasing FDI limit in insurance from 49 percent to 74 per cent.
These measures on banks and insurance companies would increase independence, bring in a professional approach, and will improve operational and financial efficiencies within the banking and insurance industries. A revamped reforms-based result-linked power distribution Scheme to equip DISCOMS and promote competition in the power distribution sector has also been envisaged.
This reform that has perhaps not got its legitimate space in the discussions is one of the boldest reforms of the government that in one package brings in efficiency, cost reductions and ease of doing business. The PLI scheme announced in Aatmanirbhar Bharat is now further strengthened with close to Rs.2 lakh croreallocation over the next five years. A reinvigorated Disinvestment programme with a clear delineated role for PSUs in four strategic sectors further evinces the resolve of Government to enhance the allocative and productive efficiency of invested capital. The direct tax proposals in the budget induce investment through reducing compliance burden, faceless assessments and appeals, and increasing exemption for startups and One Person Companies. All these steps are in line to promote ease of doing business and encourage investments.
As the pandemic tested the mettle of every section of the society and the economy, Government spending cushioned the distress and the contraction in the year 2020-21. An expected fiscal deficit of 9.5 percent of GDP in 2020-21 and 6.8 percent in 2021-22 is a clear testimony to the resolve of the Government to lend transparency to its accounts. This reflects a bold decision of clearing the food subsidy and fertilizer subsidy arrears and financing them through budgetary outlays. The extra-budgetary resources for 2021-22 have been reduced to nil. These figures are, further, based on conservative and realistic estimates of a nominal growth of GDP at14.4 percent and gross tax revenue growth of 16.7 percent – lending further credibility to the fiscal numbers. The return to fiscal consolidation is envisioned steadily to reach a fiscal deficit of 4.5 per cent of GDP by 2025-26 on the back of higher realization of disinvestment and asset monetization proceeds, improved management of expenditures and increased compliance on taxation front, as recently seen in month wise GST collections reaching new peaks. The Government remains committed both to fiscal prudence and to give the requisite impetus to growth. In all, Budget 2021-22, treads a fine balance in incentivizing all stakeholders in the economy to propel growth and realize the sankalp of an Aatmanirbhar Bharat – a land of promise and hope ready to usher in the new decade!  The writer is Secretary, Dept of Economic Affairs and views expressed are personal.