Budget 2021: Expectations in the post-Covid era

Last year saw a massive fall in GDP due to the pandemic. So, what can we expect in a post-Covid budget?

It must adopt an expansionary fiscal policy, cutting taxes to increase disposable income and encourage spending. However, lowering taxes may increase the budget deficit leading to higher borrowing.

Investment is the only option for sustainable economic growth. It is influenced by aggregate demand and aggregate supply. Aggregate demand can rise by lowering interest rates, reducing cost of borrowing, increasing consumer spending and investment, increasing imports and exports and increasing domestic demand.

Boosting automobile industry by GST cuts, promoting hybrid and electric vehicles, boosting construction industry by tax rate cuts, massively promoting self-redevelopment through loan melas for stalled projects are good ideas.

Aggregate supply can be raised only when productive capacity rises. The budget must invest in development of new technologies like AI, ML, Blockchain, cloud technology, so their benefits reach the last mile. Introduction of new management techniques, rationalisation of labour laws, improved skills and qualification, institutionalisation of skills within schools and impart of competency based employable skills for people with no formal education, adopting flexible working practices like working from home, creating more opportunities for self-employment, raising retirement age and increasing public sector investment are all the ‘DO’ things this fiscal that will write a great Atmanirbharta story.

That story can only be operationalised by majorly developing manufacturing, infrastructure, surface, air and water transportation, defence and agriculture sectors.

Time and cost escalation due to long gestation periods for capital projects, complex procedures and compliances are all real. Process optimisation and R&D investments are required. Our MSME’s can be revitalised through innovation and efficiency. Apprenticeship model supported by collaboration with local universities and tailor-made financing schemes must be instituted. Large-scale investment in infrastructure to build highways, expand capacity of the rail network and building ports must be made. Inland waterways tor reducing cost of transportation must be developed.

Investments in infrastructure can boost GDP by at least 1-2% every year, besides creating jobs. Both public and private investments and different PPP models must be explored.

Foreign players must be encouraged to invest in infra projects. Besides contributing to the local expertise, they help in expanding businesses outside the country, that help FDI inflows. Some chronic problems like projects halting before time, low investments, difficult business environment, unskilled labour market, corporate financing problems, and higher credit risks for public banks curbing new loans must be effectively addressed.

Within the defence sector, investments in R&D, creating network of National Laboratories and Universities must be enhanced. The DPSUs and OFs facing competition from the private sector need must be addressed. Corporatisation of Ordnance factories is a must.

Within the agricultural sector, lending with lower interest rates, introduction of cluster land banks, cold storage infrastructure, organic farming, cattle conservation and ‘Farm to Home’ concepts must be adopted. The budget must aim to achieve a Z-shaped recovery.

(The writer is former Chairman, All India Council for Technical Education (AICTE). Views expressed are personal)