Watch: Beyond the Hype, the Serious Concerns and Real Truth About the Budget

Five of India’s top economists, bankers and industrialists – Jayati Ghosh, Indira Rajaraman, Rathin Roy, Jehangir Aziz and Naushad Forbes – discussed important issues, concerns and problems related to 2021 Union Budget that earlier have not got the attention they deserve, but now need to be focused upon. As a result, the initial impression of the Budget could alter for many.

This is an invaluable discussion that will help understand the Budget better and, more importantly, fully. It strips away the initial hype and zeroes in on the actual content, as well as a lot of the detail that was not in the budget speech but had to be teased out of the budget papers or discovered between the lines of what was either not openly said or only spoken sotto voce.

Here are some of the key issues discussed by the panelists:

• How real is the claimed increase in health expenditure of 137% to a total of 2.23 lakh crore?
• How likely is it that the increase in CAPEX of 34.5% from 4.12 lakh crore to 5.54 lakh crore will actually be implemented or could it end up either being unspent or tied up in bureaucratic knots?
• Will the increase in FDI in insurance to 74% appeal to foreign investors or could they have concerns about the requirement for the majority of directors and key management to be Indian and could they also have other concerns about the rules governing both life and general insurance in India?
• Has the finance minister done enough for critical sectors of the economy that are in dire straits i.e. MSMEs, which account for 30% of GDP, 45% of manufacturing and employ up to 12 crore people, the unorganized sector, which provides 90% of employment, and service industries that bore the brunt of the lockdown such as hotels, restaurants, airlines and tourism?
• Subsidies for food, fertiliser and LPG as well as the allocation for NREGA have been cut between 30% and 60% compared to last year’s RE – is that understandable because a lot of it was intended as emergency relief during the lockdown? Or is it a mistake because the need for relief continues?
• Unemployment and job creation – the Centre for Monitoring the Indian Economy says employment has fallen by 14.7 million. Private surveys suggest it has fallen by 18 million. Separately, NREGA records show 10 crore people availed of this facility up till 10th January, an increase of 21% over last year. No doubt the stress on infrastructure will create jobs but it has a long gestation period. Meanwhile, the NREGA allocation is down by almost 30%. So beyond the investment in seven textile parks, how much relief is there for the unemployed?
• Many people believe there is an urgent need for income support for households in distress and small businesses like MSMEs that are in dire straits. This would create demand, increase consumption and provide incentives for investment. The finance minister has not taken this route. Was that a mistake?
• The finance minister has transparently acknowledged a fiscal deficit of 9.5% with very few, if any, off-budget items not accounted for. Next year it will be 6.8%. It will only come down to 4.5% by 2025-26. Is this fiscal honesty? How much credit does she deserves for this?
• Disinvestment – this year’s items (Air India, BPCL, the Container Corporation, etc.) will be disinvested next year. So too two public sector banks and a general insurance company. And the stock markets is booming. But the budget target is just 1.75 lakh crore i.e. 35,000 crore less than this year. Does that reflect the finance minister cannot disinvest everything she wants to? Or that she will get less money than she wants?
• On the one hand, the finance minister has broken taboos and is willing to privatise PSU banks and insurance companies. On the other hand, she’s rejected the temptation to impose a wealth tax or a one-off tax on the super-rich. There’s a clear ideological message here. Is it the right one? (This is, of course, a subjective matter. Different people have different answers).
• The main method of financing the government’s deficit is debt. The government will borrow 3,700 crore per day. This means the interest cost will move from 36% of net revenue receipts to 45% next year. How much of a concern is that?
• Non-performing assets: the RBI’s Financial Stability Report says by September 2021 they will rise to 13.5%. For public sector banks they will rise to 16.2%. The government is creating an Asset Reconstruction Company to tackle this. Is it the right thing to do? However, if there is no improvement in the governance of public sector banks will we carry on creating NPAs?
• Will the proposed ARC put an end to the twin balance sheet problem that’s paralysed the economy for several years?
• Asset monetisation: Not just surplus lands but also airports, roads and highways, sports stadiums, oil and gas pipelines. If handled properly this could raise vast sums. But will it be? Does the devil lie in the implementation?
• How will history remember this budget?
• What will the economy look like one year down the road? Will we have surging growth or worrying inflation?
• Does this budget make India a more exciting place for foreign investors? Not just insurance companies but sovereign investment funds and companies that want to diversify beyond China?