The Budget has laid the foundation for inclusive and sustained growth
India’s recovery from the coronavirus pandemic has been nothing less than spectacular. More than 1.7 billion doses of the vaccine have been delivered in less than two years, and a food crisis has been averted by executing the world’s largest free food grain distribution programme. Thanks to the fiscal stimulus, and impressive corporate performance, the Indian economy is the fastest growing among all large economies, according to the International Monetary Fund. Foreign money has poured in, and a record number of unicorns were born last year. The dynamism of startups and entrepreneurs is palpable.
Yet, challenges such as largescale job creation, support to struggling micro, small and medium enterprises (MSMEs) hit by the pandemic, and making up for the two-year education backlog of school children remain. The objective of the Union Budget is, then, to balance the imperatives of meeting these immediate challenges while also laying the foundation for long-term sustainable, inclusive growth. This has been done eminently well.
Welfare spending is up substantially, and so is spending on capital items such as roads, railways, ports and airports. The predominant theme of this Budget is indeed that of “capex”. I believe that India will see a resurgence of capital and investment spending in the coming decade, both from the public and private sectors. The total public capex spending next year will reach nearly 3% of the Gross Domestic Product (GDP), perhaps even higher in the coming years. This thrust on capex has not compromised the fiscal situation, which is an admirable feat. The finance minister said that the government is well on its way to meeting the fiscal deficit target of 4.5% of the GDP by 2026.
If anything, the revenue estimates are conservative, and will spring a positive surprise in the coming year. Just this past fiscal, the total gross revenue was ₹3 lakh crore more than what was budgeted. And nominal GDP, or national income, grew by three percentage points more than projected last year.
Another notable theme in this year’s Budget has been the proposals that are forwardlooking, future-oriented, and address the aspirations of future generations. The introduction of blockchain-based digital currency is one example. India will be one of the few countries to start using digital currency. This also gives a boost to the immense talent that is working in this cutting-edge field. Electronically linking all one-and-a-half lakh branches of the post office bank is another example of an aspirational initiative. That is sure to connect rural savers with mainstream financial services.
The floating of a sovereign green bond is a third example. It shows an innovative form of financing, and an enlightened policy, which will nudge the economy to transit toward a greener and cleaner growth path.
The agenda of climate action is front and centre for the government. India’s ambition for a share of renewable energy in the national energy mix is one of the boldest in the world. Drones as a service initiative, a national e-portal for skilling and training, and national policy on battery swapping are further examples of futuristic thinking.
While there is an emphasis on investment for future growth and aspirational initiatives, the welfare aspects have not been ignored. Indeed, the recognition of the need for a national tele-mental health counselling programme is admirable and progressive. Likewise, the strengthening of the anganwadi system is also welcome.
India’s recent strong performance in exports, robust collections in Goods and Services Tax , high growth in major economies in the world, all these are good tidings. The Budget has laid the foundation for sustained and inclusive growth, with a focus on public spending on infrastructure, which will surely induce private investments in the coming years.