Budget 2021 aims to reset economy with honesty in numbers, without doles

A man walks past a digital screen displaying Finance Minister Nirmala Sitharamans budget speech, at Bombay Stock Exchange (BSE) in Mumbai, Monday, Feb. 1, 2021. | Photo: PTI
Finance Minister Nirmala Sitharaman more or less presented a very transparent set of numbers in her Budget speech for Financial Year 2021-22. The markets were surprised but the admission of a 9.5 per cent of GDP fiscal deficit number for FY21; and the estimate of a 6.8 per cent for FY22 leaves no chance for a quibble of hiding bad news in the mounds of budget numbers.

Having done that she has made it easy to keep giveaways to the minimum. She has instead decided to encourage capital asset building by 44 per cent in the economy (year-on-year) and cut a series of niggling compliance edges for the tax paying population. On the policy front her interventions has been minimum: the most significant being raising the FDI cap with management control for insurance companies and a significant rationalisation of laws for the capital market.

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By bringing the money paid by Food Corporation of India out of the National Social Security Fund onto the government budget, she has ensured that not only the budget numbers look more accurate, but also gives the government a powerful political number to counter the claim of not having done for the cause of farmers. She also had limitations as the higher allocation from the 15th Finance Commission to the states comes into play immediately.

It was never expected that Prime Minister Narendra Modi will make the budget an occasion for grand annual statements. The budgets of this government have never been occasions for him to make grand economic policy statements. The eight presented by three finance ministers since FY14 have not been the major templates to set the directions for government policies.

Similarly Jan Dhan Yojana, Ayushman Bharat, or Prime Minister’s Awas Yojana were not first set out in the budgets. Bank mergers, demonetisation, GST or even the mega slashing of corporate tax rates have all happened outside the budget speech. The budgets for each year simply incorporated these announcements into their framework and set out the financial implications. To this add the winding up of the erstwhile Planning Commission--the list goes on.

Sitharaman has not added to any dole in her budget, despite demands for the same. It does not mean those will not come later this year. Instead, her budget is workman-like document to make India get back to work, with minimum interference by the government while ensuring there is certainty in the tax rates and other rules.

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