Hope for revival

The Union Budget 2021 has been called the budget of hope or as the Finance Minister put it, a 'get well soon vaccine' for the Indian economy. Coming as it does in the extraordinary times of crisis we live in, the Budget had a lot of expectations to live up to. Aside from adding lasting impetus to a struggling economy, there was also hope that the Budget would urgently address the alarming shortfall of budgetary allocation to healthcare. The early reviews for the Budget are in and the response can generally be said to be fairly positive. While there are many changes that the Budget is set to bring in, three primary points stick out. First, commensurate with the Government's intentions of reaching three per cent of GDP spending levels with healthcare, the budget more than doubles healthcare spending to Rs 2,23,846 crore which includes the allocation of Rs 35,400 crore towards the ongoing vaccine (with a promise of increasing the allocation if the need arises) and Rs 64,184 crore for a scheme to strengthen the country's primary, secondary and tertiary healthcare infrastructure. Second, there is an increased push towards privatisation and government disinvestment with the highlight being the Government increasing the FDI cap in the insurance sector to 74 per cent from the existing 49 per cent. Finally, as many have noted with optimism and trepidation, the Budget did not include an announcement of any additional taxes to finance the government initiatives under this budget. It is also worth noting that, keeping with the times, this Budget was the first true paperless Budget to be introduced. Not only was the Budget read by the FM from a tablet, but she also announced the launch of a Union Budget Mobile App that would allow members of the public and MPs to access the relevant Budget documents hassle-free.

Circling back to health, there was an announcement of a new Central scheme called 'PM Aatmanirbhar Swasth Bharat Yojana' which has the overall goal of generally developing India's healthcare infrastructure at all administrative levels And speaking of infrastructure, this Budget has been particularly noted for its emphasis on using increased spending on infrastructure as one of the major avenues of driving job growth and economic resurgence. There were announcements for road and highway projects in the states of West Bengal, Kerala and Assam in the Budget. There were also announcements that by March 2022, the Government would award contracts for an additional 8,500 km of road projects as part of the National Highway Corridor. Overall, the National Infrastructure Pipeline is slated to expand its number of projects from 6,835 projects currently to 7,400 projects. This would be supplemented by the launch of a new development finance institute called the National Bank for Financing Infrastructure and Development which will provide professionally managed infrastructure financing services to drive infrastructure growth throughout India in the long run.

Moving on to privatisation, the Finance Minister announced that the Centre would seek disinvestment of PSUs in all but four strategic areas. This disinvestment will help finance the other schemes the Government has announced without relying on the addition of any new taxes. Aside from completing the disinvestment in an already identified list of companies such as BPCL and Air India, Niti Aayog will also be asked to identify the next set of companies for strategic sale. In conjunction with this, the Government has also announced the setup of what has been called the 'Asset Reconstruction and Management Company for Stressed Assets' which will take over bad loans for state-owned banks and help clean-up their balance sheets.

Finally, there are a host of changes to the agriculture sector that are meant to fulfil the promise of doubling farmer incomes over time while also pushing ahead with modernisation. First, there was the announcement that the MSP regime has been reworked to assure a price that is at least 1.5 times that of the cost of production for all commodities. Then there was the announcement of the electronic integration of a further 1,000 mandis.

Overall, with a host of bold and long overdue changes such as the announced reforms to the power sector in regards to distributors, expansion of social security net for gig workers, etc., the budget has been seen as some as an attempt towards true change that does not stride for populist measures. At the same time, pushing for the increased privatisation of the insurance sector and boosting general disinvestment from PSUs is considered a bold statement by the Government at a time when its already facing significant challenges for the pending farm bills. Some have praised the Budget for making what they claim is a Budget document that does not hold back for the purpose of playing politics. The goal of the Government is to make the economy rebound at 11 per cent real GDP growth next fiscal. However, it may be noted that the estimated GDP growth will still be 10 per cent lower than it would have been for the same time period without the pandemic. While there is great optimism for the potential of a rebound, this trend is not expected to subside any time soon. There are some other concerns as well. For one, many have noted that the budgetary allocation for education is actually down some 6 per cent at a time when the education sector is reeling and much the same as many other institutions, needs a 'head to the toe' reform process. The real fear in this is the increased potential for privatisation in this sector at the expense of negatively impacting the government school system in the country which has already seen disproportionate impacts of the pandemic. This raises the issue of aggravating already existing inequalities in education access across the nation. In a similar vein, the Budget is also not seen to address the problem of growing wealth inequality in our nation. A recent Oxfam report emphasis that wealth inequality in India during the pandemic has climbed at alarming rates, surpassing even China. It is unclear how this Budget would seek to redress this particular issue with the conspicuous lack of increased taxation on the wealthiest that many expected it to have. But these are early days and the negative and positive impacts of this budget will finally depend on how far intent and rhetoric can be turned to reality.