Run Up To The Budget 2021-22

Context: Union budget that follows economic crises must prioritize policy support for inclusive growth and economic revival over fiscal concerns.

Key Sectoral Pillars for Economic Revival

• In Agriculture: Along with the recent farm laws, which promotes national market and catalyze opportunities in food processing and cold chains, the following steps can be accompanied:
  • Creating avenues for higher farm incomes: by strengthening the collective bargaining power of farmers through Farmer Producer Organizations (FPOs) to leverage economies of scale.
    • Defining FPOs as Micro, Small, and Medium Enterprise (MSMEs) will improve accessibility to institutional credit.
  • Support to commodities markets to help farmer’s hedge prices and manage seasonal risks.
  • Digitalization initiatives like agriculture information stack can collect, process and disseminate information on farms and crops and help improve productivity.
• In Manufacturing: Efforts to improve Ease of Doing Business (through Production Linked Incentive and Phased Manufacturing Programme) should be accompanied by -
  • Improving Cost of Doing Business (CoDB) through efforts like -
    • Include CoBD as a parameter for ranking states.
    • Minimizing cross-subsidy in power and railway freight.
    • Creating land bank corporations at the Centre and states.
    • Accelerating investment in industrial and logistics infrastructure under the National Infrastructure Pipeline (NIP).
  • Ensuring low-cost credit to accommodate future shift (69% as per FICCI) in global manufacturing from China to India through -
    • Creation of National asset management company or ‘bad bank’.
    • Convert Non-Banking Financial Companies (NBFCs) into universal banks and let large corporate and industrial groups to enter banking.
    • Set up a development finance institution that can raise money from sovereign wealth funds and other long-term institutional investors.
• In Services: Union budget should include targeted fiscal interventions to support discretionary spending and catalyse demand in services sectors.
  • Reform fee structures at higher educational institutes in line with market-determined rates in addition to encouraging private participation (through National Education Policy).
  • Increase healthcare expenditure (to at least 0.5% of GDP) and provide tax benefits to the private sector on capital expenditure and skill development spends to mitigate Covid’s fallout.

Key Elements of Inclusive and Substantive Budget

• Ensure fiscal support: relax fiscal consolidation for and preparing a roadmap for the same.
  • Define ‘fiscal deficit range’ including off-budget liabilities, and ensuring greater transparency.
  • Accelerate capital expenditure: complete infrastructure projects in National Investment Fund (NIP) to kick-start a virtuous cycle of revenue, job creation and private investment.
  • Raise resources for capital expenditure through disinvestment, strategic sales and monetization of land and other Public Sector Units (PSUs).
  • Increase healthcare expenditure to at least 2.5% of GDP by 2022 (from 1.5%) as per the target of 2017 National Health Policy.
• Release government-owned payments or tax refunds: owed to service providers (e.g. GST refund)
• Rejuvenate Public Sector Banks (PSBs): by bringing down stake of all PSB (except 3-4 financially strong banks) to below 50% through the market.
  • Create multiple bad banks, development financial institutions, and agency for the investigating financial sector frauds.
• Increase exports: Reducing import tariffs to exploit and benefit from global markets and value chains.
• Increase employment:
  • Raise the cap to ?50,000 to become eligible for 30% deduction on emolument to new employees.
  • Enhance allocation under MGNREGA, job stamps scheme for urban employment and addressing skill gaps.

Conclusion: Budget must be aimed at revitalizing growth drivers, alleviating distress, supporting livelihoods and creating a resurgent India that is both inclusive and self-sustaining.