Thinkpad: The Rescue Act
I refrain from saying ‘Happy New Year’ because I suspect most of us are already neck-deep in work. The warm, fuzzy holiday feels...sigh...have been shed.
The big item on the agenda is the upcoming Union Budget.
Budgets are a statement of accounts. What we earned, what we spent. How we hope to earn, where we plan to spend. But here in India, we love a good production. And the budget is the production of the year. A speech peppered with poetry. Promises made, which may or may be kept. And, lately, estimates given, which may or may not be met.
This year the anticipation around what the government will do / can do / should do is at a peak. There is much hope that the government will pull off a ‘rescue act’ for the economy. Finance Minister Nirmala Sitharaman hasn’t exactly tempered these expectations by promising a budget the likes of which has not been seen in a 100 years.
Over the course of a little less than four weeks, BloombergQuint will write and talk about what the government needs to do to pull off this “rescue act”. Here’s what’s on our list:
The last few years have been spent in a data fog. Even estimates of revenue collection in budgets of the last few years have been much off-the-mark. The government would do well to clean-up its act and give credible numbers. In short, let’s begin again.
Since we will also see the fiscal roadmap get reset this year with the Fifteenth Finance Commission’s recommendations, the framework should set clear and, more importantly, achievable milestones.
Healthcare will need to be a priority as the government funds at least part of the vaccination program. But the Covid-19 experience has highlighted the inadequate spend on healthcare in the Indian economy, which currently stands at just 3.6% of GDP. A start can be made in rectifying this.
Inadequate jobs have been the bane of the Indian economy. Denying it with carefully cured statistics is pointless. Jobs come from investments. Some parts of the Indian corporate sector may now be ready to invest after a period of deleveraging. It wouldn’t hurt for the government to kick-start the investment cycle via a larger commitment towards funding public works.
But that’s only if they can simultaneously set up infrastructure funding structures more resilient than the phone banking days of the past.
The Covid-19 crisis has widened inequalities. While it is tough to design budget items to deal with this, the government can, at the very least, ensure that social security programs like MGNREGA remain well-funded.
And finally, the Indian consumer needs the confidence to spend. Some of this will come from better jobs and job prospects but can there be short-term tax cuts considered?
Where’s the money for this long “to-do” list? The answer is a familiar one but one that needs a new approach. Privatisation of not just government enterprises but resources, in particular land, will need to tackled head-on.
We have two choices. We can get at least some of this right. Or we can just hobble along.
You keep tracking BloombergQuint for detailed reports and views on all of this ahead of #Budget2021. ‘Be there or be square’, as they used to say when some of us were younger.
Wishing you a productive year ahead.