Budget FY22: A strong foundation

By Uday Shankar
Indian Union Budget 2021-22: The Covid-19 pandemic-induced economic crisis ensured that 2020 was a total washout. To revive investor sentiment and unleash animal spirits, a fiscal stimulus was the need of the hour. And, the finance minister has delivered just that heal to an ailing economy. The Union Budget FY22 was the much-needed booster shot to kickstart economic recovery and ensure sustained growth.

The FM has delivered a pragmatic budget under challenging circumstances. The huge thrust laid on capital expenditure is the biggest takeaway from her speech. Physical, digital, financial as well as social infrastructure have seen a significant push, which should propel growth and aid fast economic recovery. At the same time, the bold and decisive steps announced in the budget will facilitate sustained high growth over the long term.

Overall, fiscal management has been prudent. The government has adopted an expansionary policy and relied on a mix of borrowings and unconventional revenue sources. The focus on garnering non-tax revenues through strategic disinvestment, privatisation and monetisation of non-core assets will help the government raise much-needed resources to fund the development expenditure.

By offering lucrative incentives, the government has also targeted foreign investors to pour in the capital in India’s financial markets. The proposed simplification in the Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (invites) will help attract foreign investments in these areas. The creation of a Development Finance Institution, as well as an increase in the FDI limit in the insurance sector, will help raise long-term funds to invest in the infrastructure sector.

The decision to privatise two public sector banks and one insurance company underlines the government’s commitment to limit its presence in the strategic sectors and allow the private sector to play a larger role. In the aftermath of the pandemic, the balance sheets of banks are expected to further deteriorate. The need to support them up at this juncture is extremely important.

The Federation of Indian Chambers of Commerce & Industry (FICCI) has long advocated the need to set up a National Asset Management Company to strengthen the banking system, and it is heartening to hear that the government will set up an Asset Reconstruction and Management Company. This will help banks to unlock stuck capital and use it for more productive purposes. Additionally, the decision to recapitalise public sector banks to the tune of Rs 20,000 crore will prepare them well to meet a growing economy’s credit requirements.

Perhaps, the biggest beneficiary of the Budget has been the healthcare, with a 137% increase in its outlay. The government has used this opportunity to provide a much-needed financial boost to healthcare which, in the past, didn’t get the support it deserved. Additionally, the launch of the Atmanirbhar Swasth Bharat Yojana will strengthen primary, secondary, and tertiary healthcare infrastructure and create new institutions, addressing huge gaps in healthcare facilities in the country. Further, initiatives announced towards a cleaner environment namely the Urban Swachh Bharat 2.0 Mission, Jal Jeevan Urban Mission and Mission Poshan 2.0 will support the government’s objective to ensure the good health of India’s citizens.

The government has supplemented last year’s agri-marketing reforms introduced last year, with an attempt to create an enabling environment to make these reforms effective. Linking 1,000 more mandis with e-NAM and the availability of Agriculture Infrastructure Fund, to augment infrastructure facilities of the APMC, will help integrate the national agriculture supply chain. The doubling of a corpus for the micro-irrigation fund will ensure efficient water use in agriculture, which is critical for the sector’s sustainable growth. The expansion of 22 additional perishable crops under ‘Operation Green Scheme’ is a welcome step that will enable greater exports of perishables from the country.

Winston Churchill once said that one should “never let a good crisis go to waste”. FM Nirmala Sitharaman has seized the moment to deliver a Budget that is growth-oriented and lays a strong foundation for an Atmanirbhar Bharat.

President, FICCI. Views are personal