The 2021-22 Union Funds, the third introduced by Finance Minister Nirmala Sitharaman, needed to be an unprecedented train because the Indian economic system has been beset with a downturn that predates the Covid pandemic by greater than two years. For 9 straight quarters till the top of the earlier monetary 12 months, India’s GDP had declined. On the coronary heart of this slowdown was an acute demand crunch, attributable to
the rising ranges of unemployment and steeply declining ranges of labour pressure participation.
It was eminently clear to any scholar of economics that for the economic system to revive, the federal government must flip its consideration in direction of creating extra consumption demand by enchancment within the situation of the wage earners. The federal government wanted to answer this case instantly, which it did, in accordance with the Funds introduced by the finance minister. There was a steep enhance within the spending on the Mahatma Gandhi Nationwide Rural Employment Assure Programme (MGNREGA) through the 2020-21 fiscal: In opposition to the budgeted Rs 61,500 crore for the 12 months, the revised estimate of spending was Rs 1,11,500 crore, a rise of about 72%.
Nonetheless, for the fiscal 12 months 2021-22, the expenditure of MGNREGA has been diminished to Rs 73,000 crore, or a decline of greater than a 3rd from the revised estimate. These numbers clearly mirror the point of view of the federal government that it doesn’t take into account the issues going through the nation to be of a structural nature that require sustained help to the migrant employees, who’ve been severely affected by the disaster. By doing so, the federal government has additionally signalled that it doesn’t suppose a revival of home demand is a part of the answer to the continuing woes of the economic system. India’s financial revival critically hinges on sufficient availability of vaccines, which the federal government appears to have ensured by rolling out the most important vaccine programme.
Nonetheless, on the similar time, it’s vitally essential to make sure that not solely is that this programme in a position to attain everybody within the shortest potential interval, however the vaccines are additionally made reasonably priced. The prerequisite for doing so is an efficient public well being system, however over the a long time, our well being infrastructure has confronted systematic neglect. In response to the Covid pandemic, most international locations have been specializing in beefing up the well being infrastructure, particularly by authorities spending, and subsequently there was appreciable curiosity within the strikes that the Authorities of India would make. Nonetheless, the numbers obtainable from the brand new Funds current a dismal image. The whole spending on well being, which is anticipated to be round Rs 80,000 crore in 2020-21, is projected to say no to simply above Rs 71,000 crore in 2021-22. This raises questions over the flexibility of the federal government to ship on the guarantees to make Covid vaccines obtainable for all.
The Funds for 2021-22 was essential, above all, for testing the federal government dedication to fiscal insurance policies going ahead, since, in accordance with the Worldwide Financial Fund (IMF), fiscal measures utilized by India have been among the many lowest amongst G20 international locations. The IMF has been emphasising on the usage of fiscal insurance policies and likewise reminding governments in regards to the growing function that public sector enterprises (PSEs) have been enjoying in superior international locations, particularly within the aftermath of the worldwide monetary disaster of 2008.
Opposite to this recommendation, the Authorities of India has been growing the tempo of privatisation of PSEs and this Funds isn’t any exception, with the finance minister making the large announcement of divestment of presidency shareholding within the Life Insurance coverage Company. The query that arises right here is whether or not the federal government has explored all of the avenues of garnering sources for financing the Funds. The query is within the unfavorable, given the spate of tax concessions which have been handed out to the corporates, particularly when there’s proof that the previous concessions haven’t helped in reviving the economic system. A second and extra essential side that the federal government wanted to take cognisance of is that promoting public belongings, that are like household silver, just isn’t a sustainable approach of funding the Funds.
Biswajit Dhar (firstname.lastname@example.org)
Professor, Centre for Financial Research & Planning, College of Social Sciences, JNU