Union Budget 2021-22

Post lockdown, the way Indian economy has shown the resilience with V shaped recovery, it indicates to an optimistic future and this good for Indian economy as a whole. This optimism in the environment has also been echoed by the stock market. However, it is very important this optimism in the economy gets strong fiscal support with proper anchoring from the government in the budget.

The government has tried to align the budget 2021-22 with the Atma Nirbhar Bharat Abhiyan which mainly focused on the supply side of the economy. In this budget can be termed as mixed budget as it has provided enough support to industries to increase the economic activities but has not be able to provide direct support to increase the income. There is no personal tax rate cut in this budget. Also at the same time, the fund allocation to the MGNREGA scheme has gone down by 34.5% from ₹1,11,500 crores to ₹73,000 crores. MGNREGA has provided huge support to Indian economy during the COVID period. This can be an indicator of the shift in the policy on the front of the employment. The government might be looking for the ways to increase the employment opportunities with formal jobs than informal jobs. However if this is the thing of scheme of the government, it is very high expectation (possibly unachievable in short term). But to some extent this will ease the fiscal position.

In this budget government has allocated same amount of funds to PM Kisan Scheme along with the increased the fund allocation to education and healthcare sector as well as Jal Jeevan Mission, metro projects, road construction and smart cities. It has announced a favourable Vehicle Scrappage Policy for the auto sector. However as far as the healthcare sector is concerned, the government has increased allocation to the sector but has not been able to provide an anchor to transform the Indian healthcare sector to gain on the vaccine lead that India has gained.

One of the most important developments in this budget is the focus on the fiscal transparency. In this budget the government has decided to clean-up the fiscal accounting. To some extent this is responsible for the higher than expected fiscal deficit this year. This year, the borrowings of the Food Corporation of India will be accounted in the government budget. Until last year FCI used to borrow from National Small Savings Fund and these borrowing were part of off budget or extra budgetary resources.

Rajeev Upadhyay