Budget 2021: Concerns

Concerns regarding the budget:
  • Adherence to incrementalism:
    • Given the abnormal times for the economy, which requires non-standard policy responses, the Budget maintains incrementalism and continues with business as usual.
  • Insufficient public expenditure:
    • There is very little increase in the overall expenditure of the government.
    • Only 1% increase in overall expenditure.
    • Though capital expenditure has increased by 26% it still accounts for only 15% of the total expenditure.
  • Neglect of immediate concerns:
    • Declared amounts would be spread over the next six years. Hence the yearly outlays would be much smaller.
    • The immediate outlays are of significance in the present circumstances, when the overall demand in the economy is tepid.
  • No multiplier effects soon:
    • The budget bets big on growth and employment generation through enhanced capital expenditure via the infrastructure push.
    • This approach in turn bears two risks at the moment.
      • There is a risk of delay in completion, which can lead to cost overruns.
      • The life cycle of the infrastructure projects is long and hence there is the need to have an inventory of funding ready in the pipeline to make the current investments impactful.
    • The immediate multiplier effects to lift the aggregate demand in the economy might not emanate as quickly as expected.
  • Neglect of critical sectors:
    • Agriculture and MSME segment, which shores up demand with their consumption multipliers, seem to have been accorded lower priority.
  • Threat to exports unaddressed:
    • A lack of concrete policy towards export promotion at a time when the exchange rate is appreciating and there is an increasing tendency of protectionism being observed, might undermine the competitiveness of manufacturing exports from India.
  • Neglect of unemployment generation:
    • The growth push of the Budget subsumes the welfare implications. Both employment and demand generation remain mostly unaddressed. There is a lack of a concert plan to tackle urban unemployment. This could prove disastrous, given the demographic profile of the country.
  • Resources and spending:
    • The resource mobilisation for spending would be banking on disinvestment, privatisation and asset monetisation. There are concerns whether this would be successful given the previous attempts at disinvestment.
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