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Mainstream, VOL LIX No 8, New Delhi, February 6, 2021

The Union Budget 2021-22: Conceals more than reveals? | P.S. Jayaramu

Saturday 6 February 2021

by P.S. Jayaramu

The Union Budget presented by Finance Minister Ms. Nirmala Sitharaman, was prepared under the shadow of two pandemics, largely the Covid pandemic, going by the attention the Budget gives to the health sector and the economic pandemic which preceded the onset of the corona virus in India. Influenced to a certain by the global economic slowdown, the GDP growth has contracted to 7.7 percent during 2020-2. The World Bank as well as many desi economists feel the country will return to the 8-9% GDP growth not earlier than 2025. To be fair to Ms. Sitharaman, it must be stated that In spite of the adverse circumstances, she has come up with a budget, some aspects of which have been acclaimed by many analysts. In a macro level analysis like the one attempted here, the focus is on the major aspects of the Budget 2021-22. The endeavour is to understand the allocations made against the revised estimates of the present fiscal year in the sectors chosen for analysis with the idea of getting as real a picture as possible.

Let me first take up the health and well being sector which the finance minister flagged as the first of the six pillars of her budget. The FM announced that the Government will spend ₹2,23,846 crores in 2021-22 on health and well being, which of course includes an outlay of ₹60,030 crores on drinking water and sanitation and ₹35000 crores towards the vaccination drive under way. The Health ministry expects to spend ₹71269 crores in 2021-22, an increase of nearly 9% from the budget estimates of the last year. But available statistics shows that it will be less than what the Ministry actually spent last year. As the revised estimates in the budget documents show, the amount spent was ₹78,886 crores during the financial year. The Health minister Dr. Harsh Vardhan, however, says that investment on health infrastructure has been increased with focus on strengthening three areas, namely, preventive health, curative health and well being, which will be of immense value to the country. Statistical details notwithstanding, many health experts have lauded the outlays, though the suggestion before the budget was to earmark 6% of the GDP on health care. If the country can successfully overcome the Covid pandemic without undergoing a second wave and if the outlays are actually spent, India would be on an upward trajectory in ensuring the health and well-being of the people.

Infrastructure development, including the development of national highways, ports and railways has occupied the second priority of the Budget. While one should remember the late Prime Minister Vajpayee for his vision of constructing national highways, connecting the country from Kashmir to Kanyakumari and while the highways project maintained a momentum during his time, the same slowed down during the UPA regime and was vigorously brought on board between 2014-19 by Nitin Ghatkari as minister in charge. The Government has announced that the National Infrastructure Pipeline has been rightly been recognised as one of the best means of not only ensuring development but as a major source of providing employment. The Budget allocates ₹1.97 lakh crores for Infrastructure development over 5 years starting from 2021-22. That the election bound States of West Bengal, Assam, Kerala and Tamil Nadu have been chosen as priority States for allocation is popularly perceived as being done with electoral calculations. CPM General Secretary Sitaram Yechuri says that by the time the allocations start materialising, elections in these States would be over!

Agriculture is another key area where the Budget seems to have laid focus, when seen against the background of the ongoing farmers protests over the three Farm Laws. The Finance Minister used the occasion of budget presentation to reel out statistics on MSP paid to farmers produce during 2013-14 and during the NDA regime, to the applause of ruling party MPs. While the APMCs have been allowed to tap into the Agriculture Infrastructure Fund(AIF) of ₹1 lakh crores, actual outlays for PM-KISAN seems to have seen a 13% drop in it’s budget which is ₹10000 crores lower than the last year’s initial allocation.( The Hindu, 2nd February 2021) Reportedly, even the beneficiary numbers from the income support scheme is estimated to have come down from 14.5 crore households to 9 crore households. The Farmers Associations too have dismissed the finance minister’s claims on MSP hike renewing their demand for MSP based on Swaminathan Commission’s recommendation of C2 plus 50%. The announcement about the levy of Agri Cess on selected items like petrol and diesel to improve agricultural infrastructure is ultimately going to be a burden on the consumers, specially the lower middle class vehicle users. Though the minister has stated that it will be absorbed by the companies, the fear is that it may be transferred to the consumers over a period of time. In any case, the fact that the Central Government will not share the Agri cess revenue with the States.

As for MNREGA scheme, rightly described as the lifeline for rural India during the Covid pandemic, though the FM stated that the allocation for 2021-22 stands at ₹73000 crores, a closer look reveals that the amount earmarked is lower than the ₹1.1 lakh crores in the revised expenditure estimates for 2020-21.

Requirements of the MSME sector which suffered heavily following the lockdown and a virtual halt in production, with lakhs of workers being thrown out of jobs, has rightly received emphasis in the Budget, with an allocation of ₹15000 crores, almost double from the previous year, as the FM said in her speech. Exemptions from duty on steel upto 31st March 2022 and a host of duty cuts announced are encouraging.

Announcements like privatisation of two public sector banks (instead of improving their governance structures and mechanisms), seeking augmented FDI in insurance sector and allowing increased foreign ownership limit to 74%, though safeguards like reserving majority of Board membership to indians only ( one doesn’t know how effective the Indian members in the Boards will be in safeguarding our interests) and the continued accent on disinvestment albeit a reduced target of ₹1.75 lakh crores from the previous year’s figure of ₹2.1 lakhs are proofs of the continuties in the neo liberal policies of the Government.

One of the key concerns of the FM is on cutting the fiscal deficit. She has pegged it for 2021-22 at 6.8% of the GDP. The original target for 2020-21 was 3.5% while under the impact of the pandemic, lockdown and loss of revenue, the fiscal deficit went upto 9.5% of the GDP. The FM hopes to bring it down to 4.5% by 2025-26. Experts are divided on the fiscal deficit issue, with some calling for bringing it down while many argue that the Government should not get obsessed with fiscal deficit, but focus on growth and job creation.

Regarding the Defence sector, the ministry has seen an allocation of ₹21,326 crores. Excluding pension, it is pegged at 3.62 lakh crores, amounting to an increase of 1.4% over the last year’s allocation. Given the continued tensions with China and Sino-Pak military-strategic linkages with their concomitant pressure on India, the hike is anything but meagre, though defence requirements are met outside the scope of the budget depending on necessities.

Education is another area which requires higher attention. In the Budget, the FM has allocated ₹93,224 crores, out of which ₹54,874 crores is for the Department of School Education. The budget proposed is sadly a drop of over 6% compared to the last year’s budget, which ought not to have happened in view of the importance attached to school education under NEP 2020. The Budget also proposes the conversion of 15000 schools into exemplar schools in the next fiscal. 100 Sainik Schools are also proposed to be established with private players. The much hoped 6% of the GDP spend on education remains a pipe dream.

As for higher education, the Budget makes a reference to the NEP and talks about the the setting up of the Higher Education Commission of India, a Central university for Ladakh, setting up of a National Language Translation Mission etc, which are laudable. As outlined in the NEP, the National Research Foundation is being set up with an outlay of ₹50000 crores over five years. The NRF is an innovative scheme to fund research in a centralised manner for subjects ranging from Pure Sciences to Social Sciences and Humanities. However, there are apprehensions that funding for research in Social Sciences and Humanities may receive inadequate support compared to hard Sciences. When seen in conjunction with education, it is unfortunate that the Ministry of Culture has seen a reduction in its budget grants from the previous year’s allocation of #3,149.86 crores to ₹2,687.99 crores for the year 2021-22, though allocation for the Museum of Prime Ministers of India, to be inaugurated next year, is fixed at ₹77.78 crores.

As the saying goes, proof of the pudding is in eating. We need to wait and see how the outlays will lead to outcomes. This Budget will also be judged from the perspective of how effectively it will contribute to inclusive and humane growth with justice.

(The author is former Dean, Faculty of Arts, Bangalore University and former Senior Fellow, ICSSR, New Delhi.)

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