Atmanirbhar Bharat 4.0

 

Union Budget 2021 draws a roadmap for growth after previous stimulus packages brought the economy back from the brink

 

 If Budget 2021 evoked memories of Budget 1991, it was not without reason. Both the exercises were undertaken against the backdrop of a perilous situation. If socialist practices had drained India of forex reserves, a global pandemic had sapped resources due to supply disruptions. The economy had contracted in H1 of the fiscal year. Timidity was not an option. After dismantling the licence raj that had turned Corporate India into a cosy club of cronies, India had to wait for three decades for a decisive about-turn on pampered PSUs. Many were draining cash without contributing to growth. Several central enterprises including LIC have been lined up for divestment. Besides IDBI Bank, two more government-owned banks and one general insurance company are to be sold off, reaffirming the intention of maintaining minimum PSU presence in strategic sectors. Additional capital infusion of Rs 20000 crore and the setting up of a bad bank to park non-performing assets will prepare public sector banks to meet the demand for credit as the economy returns to normal due to the vaccination drive, for which Rs 35000 crore has been allotted. If the aim of the three Rs 27.1 lakh-crore, or 13% of the GDP, Atmanirbhar Bharat fiscal packages announced in March, May and November and a series of intervention by the Reserve Bank of India was to support the vulnerable sections through cash infusion and loosening the loan availability to farmers, urban poor, micro-and-small-and-medium enterprises, home buyers and realty developers, Budget 2021 took forward the process by focusing on infrastructure, well-being, and minimum government.

The highest-ever GST collections in December 2020 suggest that the de-railed economy is getting back on track and ready to enter the next cycle of development. The launch of Swatch Bharat 2.0 for waste disposal, after Swatch Bharat 1.0’s nationwide coverage, is illustrative of the Modi government’s ahead-of-the-curve thinking. The unexpected hike in FDI ceiling in the insurance sector from 49% equity to 74% implies the time for incremental measures is over. In addition to spending Rs 1.97 lakh crore over five years on the 13 sectors identified for production-linked incentive scheme, setting up seven textile parks over three years will boost Make in India and generation of employment. The agriculture credit target has been ramped up to Rs 16.5 lakh crore. The outlay on highways and railway infrastructure will be Rs 2.28 lakh crore next fiscal year. Over Rs 3.06 lakh crore has been earmarked for power distributors over five years to upgrade their systems. Allocation to rural infrastructure fund has been enhanced by Rs 10000 crore and micro irrigation funds corpus doubled. Support to MSMEs is up 100%. Capital expenditure will be around 34% more than in FY 2021. The fiscal deficit of 6.8% of the GDP in FY 2022 is to be met, not by higher taxes, but through Rs 12-lakh-crore market borrowings, Rs 1.75-lakh-crore share-sale, monetising non-core assets, and handing over the running of freight corridors, sea- and airports, power transmission assets, oil and gas pipelines, railway infrastructure and sports stadia to private players.

The ease-of-living thrust comprises the Rs 5-lakh-crore AtmaNirbhar Swasth Bharat Yogna to strengthen the healthcare system and the urban water supply and waste disposal missions over five to six years. The gas distribution network is to be expanded to 100 more districts. Various legislations governing securities transaction will be clubbed into a single code. Investors will have a charter of rights. Continuing the targeted strategy implemented in the previous doses to help sectors that have a multiplier impact, the excise duty on petrol and diesel, whose end utilisation might get diffused and dispersed, has been substituted with cess to funnel resources into agriculture infrastructure. Loans to Food Corporation of India will be through the budget mechanism to bring transparency. A timeline for closure of sick PSUs will unblock assets. The tinkering with customs duties was restricted to a few items to promote local manufacturing and cool inflation and not to replenish the treasury. Concerns of rising bond yields due to government crowding out private borrowers are expected to be offset by higher investments by FPIS in infrastructure through development financial institution, zero-coupon infrastructure bonds and debt of infrastructure and real estate investment trusts. The key to success of these measures is the rollout of the reforms. The finance minister and her team deserve applause for attempting to restrict the government’s role to the social sectors.

 -Mohan Sule