The Good Budget

The Indian Express     6th February 2021     Save    
QEP Pocket Notes

Context: A good budget in the year of farmers’ protests shows the intent of the government to stay in the course of reform despite extreme provocation.

Features of the new world of macro-economics

  • Focus over privatisation and disinvestment: Bank nationalisation in 1969 signalled a new era — just more than 50 years later, India has changed course for the better.
  • Relegation of fiscal deficit to the secondary role: At present, it is realised that with unemployment, a considerable portion of deficit financing can go towards growth, rather than inflation.
  • Low inflation: Inflation in advanced economies is not high enough (2%), and in developing economies in 2019, it was just 1.5% above advanced economies.

Positive aspects of Budget 2021-22

  • Focus over privatisation and disinvestment: Bank nationalisation in 1969 signalled a new era — just more than 50 years later, India has changed course for the better.
  • Attempts to achieve transparency in fiscal math: The budget is the old-fashioned (but not old) WYSWYG — What you see is what you get!
    • E.g. Government borrowings from the Food Corporation of India will now appear as part of expenditures and as part of the deficit.
  • More realistic forecasts: Gross Domestic Product (GDP) growth estimates for 2021-22, forecasted at 14.5 % (nominal) can be exceeded.
  • Increasing expenditures: on health, roads, electricity, capital formation that will boost growth and benefits the poor.

Conclusion: Budget 2021-22 lays the foundation for a sustainable recovery in GDP growth and welfare improvement.

QEP Pocket Notes