The Importance of the Unsaid

Context: Union budget for 2021-22 has many ingredients for growth; at the same time, it left many things unchanged for good.

Positive aspects of the Budget 2021-22:

• Did not raise the taxes: Reasons being - 
  • Government believes reviving growth is the best way to shore up its revenues (rather than tax); priority is not to be revenue-minded, but production-, investment- and growth-minded.
  • Increasing taxes amounts to penalisation of wealth creators and the equities-owning middle classes and will disincentives them to invest and grow.
• Transparency in fiscal deficit: indicating the confidence of the government in running an autonomous fiscal policy and abandoning a ‘fear’ of rating agencies.
• Adjusted fiscal deficit targets for more investments: Target of 4.5% of Gross Domestic Product (GDP) by 2025-26, (well above the Fiscal Responsibility and Budget Management (FRBM) limit of 3%)
  • This will enable more investment by the government.
• Did not openly support protectionism:
  • Moderate hikes in tariffs:  which are well below India’s committed bound tariffs at the World Trade Organisation (WTO). Arguments favouring tariff hikes - 
    • Hikes will not affect imports: Hikes in most-favoured-nation (MFN) tariffs do not affect imports from these countries that are significant.
    • Helps tackle China’s non-transparent and unfair trade practices.
  • India continues to have Free trade agreements: with Association of Southeast Asian Nations (ASEAN), Japan and South Korea
  • Tariff reduction in some areas: Slashed tariffs on a major manufacturing sector, steel, and removed anti-dumping and countervailing duties.
• Promotes investment and growth: By bringing in certainty and predictability of policy and macroeconomic environment. (through moderate tax and duty rates).