How FM Nirmala Sitharaman can deliver on her promise of a 'budget like never before’

Even though the economy is recovering impressively, there is pain in the MSME sector, which calls for relief. The Emergency Credit Line Guarantee Scheme (ECLGS) for the sector should be continued for one more year. Badly impacted segments like travel and tourism need timely relief. Covid severely impacted urban employment much more than rural employment. We don’t have an urban counterpart to MGNREGS. The best way to create more urban jobs is to give a fillip to construction.

The most impressive aspect of the ongoing recovery is that it has been achieved with fiscal prudence. The strategy of allowing monetary policy to do the heavy lifting while keeping the fiscal stimulus modest has turned out to be a brilliant move. The government is now in a position to go for a one-time big fiscal stimulus focusing on spending on vaccination, infrastructure and recapitalization of banks. Expenditure on vaccination has the potential to become a major fiscal boost since it will facilitate fast return to normalcy.

If a high growth rate is to sustain beyond FY22, we need reforms. Bold announcements on privatizations are the need of the hour. Abundant liquidity and historically low interest rates in the developed world is manifesting as huge FPI flows into India. Disinvestment will be easily absorbed in this buoyant market driven primarily by liquidity. The FM should seize this tail wind to sail through privatization.

The government doesn’t have the fiscal space to give tax sops. This is not the time to tinker with tax rates. The present corporate and personal income tax rates should continue. More importantly, the FM should resist the temptation of imposing the rumored one-time Covid Tax. Taxation of capital gains and dividends also need not be tinkered this year.

In a recent press meet, the FM had said, “we shall be the engine of global growth, for which we need to build capabilities we don't have yet. India needs to be a part of the value chain." Businesses moving away from China will be a major trend, going forward. Countries like Vietnam and Bangladesh are at the forefront of exploiting this opportunity. India should build capabilities to be part of the global supply chain to gain from this megatrend.