Union Budget 2021: An effort to find opportunity in crisis

By CS Ghosh

Indian Union Budget 2021-22: Every crisis is the window to an opportunity. The last year has been a challenging one for India and its economy due to the adverse effects of the Covid-19 pandemic. In that context, the government’s focus for this year’s Union Budget – as well as the successive ‘mini-budgets’ announced over the last one year – has been to fix the economy and help revive growth.

In doing so, the government has also sought to edify a roadmap to secure India’s long-term economic interest through a slew of measures encompassing infrastructure creation, development of the MSME sector, ensuring the welfare of the rural economy and furthering the prospects of agriculture.

The substantial 135% increase in the budgeted outlay of Rs 2.26 lakh crore for health and well-being, including Rs 35,000 crore for the Covid-19 vaccine, is a step in the right direction. The other focus area for the government in this Budget, expectedly, was infrastructure. The increased outlay of Rs 5.54 lakh crore in the budget estimate for 2021-22, with a significant portion allocated towards capital expenditure, will help create infrastructure that will support India’s growth ambitions in the post-pandemic period.

Creation of the development finance institution to fund the investments need for such large-scale asset creation was expected for a while and is a welcome step. Infrastructure creation requires a copious quantum of long-term, patient capital, which mainstream financial institutions aren’t always in a position to provide.

The Budget also announced the creation of the asset reconstruction company and asset management company to take over stressed debt, and manage and dispose of the assets to other potential investors for value realisation. The details of the proposal and how it will be implemented will have to be seen.

The government realises that rural India and agriculture will play a vital role in reviving India’s economic growth. Enhancing the agriculture credit target to Rs 16.5 lakh crore for FY22 and increasing the allocation to the Rural Infrastructure Development Fund demonstrates the emphasis that the government places on this sector of the economy.

The government wants to accelerate its divestment program in FY22 by privatising some state-run enterprises. A successful divestment campaign will help the government garner the resources it needs to reduce the fiscal deficit.

 MD & CEO, Bandhan Bank