BUDGET TESTS +VE FOR HOPE

Sitharaman goes for big boost in capital expenditure, loosens purse strings on fiscal deficit No change in personal income tax slabs despite the revenue strain caused by coronavirus pandemic

NEW DELHI: Finance minister Nirmala Sitharaman on Monday unveiled a Union Budget that promised significant increase in health and capital expenditure, reforms including the privatisation of two state-owned banks and a general insurance company, substantial government spending not just next year but over the next five, and, most importantly, announced no major new taxes or levies.

Industry, the stock markets, and some economists praised the budget for doing right by an economy that has been wracked by the Covid-19 pandemic, but which is now showing clear signs of revival. It has already started its Covid-19 vaccination drive, and the country has fortuitously dodged the second wave of the disease that has laid other countries low. The International Monetary Fund estimates India will grow by 11.5% in 2021-22. The Economic Survey presented ahead of the budget estimated a real growth of 11% and a nominal one of 15.4%. The budget itself was a tad more conservative – basing its arithmetic on an expected nominal growth of 14.4%.

“This budget provides every opportunity for our economy to raise and capture the pace that it needs for sustainable growth,” the finance minister said in her budget speech.

But some other economists and the Opposition criticised the budget for reorienting its spending to capital expenditure and away from welfare schemes – something that they said would hurt the poor the most.

“Forget putting cash in the hands of people, Modi govt plans to handover India’s assets to his crony capitalist friends,” Congress leader Rahul Gandhi tweeted.

In 2020-21, as the Indian economy was roiled by the pandemic, and private investment shrank even more, the government stepped up its own spending — according to the revised estimates for the year, it will spend ₹34.5 lakh crore, up from a budgeted estimate of ₹30.4 lakh crore, and compared to the ₹26.8 lakh crore it spent in 2019-20. For 2021-22, the budget has retained the government’s overall spending at almost the same level, ₹34.8 lakh crore, but reduced its revenue expenditure by around ₹82,000 crore, and increased its capital expenditure significantly by ₹1,15,073 crore. The bet, clearly, is on growth.

“Capital expenditure is a sure-shot way of creating a virtuous cycle,” Sitharaman said in an interview, adding that this approach will have both a shortterm and a long-term impact as compared to cash-in-hand welfare schemes that largely create short-term demand.

To supplement this, India is also setting up an infrastructure-focused development finance institution, the National Bank for Infrastructure and Development, with a capital base of ₹20,000 crore and a targeted portfolio of ₹5 lakh