Carrying Over Fiscal Conservatism

Context: The pandemic may have forced increased spending in neglected sectors of the economy but the Budget seems to carry over the fiscal conservatism witnessed during 2020-21.

Implications/Impact of Fiscal Conservatism in Budgetary Funding

• Low expenditure growth: Minimal increase in projected total expenditure (just 0.95% in 2021-22) can be attributed to the persisting fiscal conservatism due to the erosion of revenue base (revenue receipts fell to ?15.6-lakh crore) as a result of-
  • Tax concessions (reduction in corporate tax rates).
  • Misconceived Goods and Services Tax regime and disinvestment agenda (just ?32,000 crore non-debt capital receipts).
• Unwinding/limited social support measures: the budget has reduced the fiscal allocation/support to those hit hard by the pandemic. For example:
  • Allocation for the MGNREGA programme curtailed, from the ?1,11,500 crore spent in 2020-21 to ?73,300 crores in 2021-22.
  • Food subsidies are reduced from ?4,22,618 crore in 2020-21 to ?2,42,836 crore in 2021-22.
• Insignificant increase in health spending: Budget-2021 estimate of ?71,269 crore for health spending points to a 9.6% increase from Budget 2020 (?65,000 crores) against the claim of 137%.
  • Rise in expenditure on safe and adequate drinking water components must be provided but cannot be a substitute for core health facilities.
    • Jal Jeevan Mission is being allocated ?50,000 crores from the cess-financed Central Road and Infrastructure Fund.
• Inadequate infrastructural push: Besides budgetary funding (claimed 35% increase in capital spending) and disinvestment of equity, strategic sale, and privatisation of the public financial sector (yield ?1.75-lakh crore in 2021-22) there is much stress on monetizing idle assets like land, available with public agencies to support private-led infrastructural expansion.

Conclusion: Budget 2021-22 supports the neoliberal fiscal stance of a lenient tax regime for private capital, restrained debt-financed spending, and excessive reliance on disposing of public assets to finance limited expenditures.