She had promised a budget, the like of which was not seen in the last 100 years. Technically, she is right. No budget in the last 100 years has been prepared under circumstances as trying as those prevailing at the moment. But in terms of delivery, the claim fails to stand scrutiny. Of course, she has done some good things and has made noises inside the box, but has not shown the courage to come out of it.

On the positive side, the finance minister has loosened her purse strings so as to increase government expenditure, without being overawed by the higher fiscal deficit at 9.5 percent. The figure is high, but extraordinary situations, like we have today in the aftermath of the Covid outbreak, demand extraordinary responses and a higher fiscal deficit is a risk worth taking, given the need to have more money in circulation. There is desperate need to increase demand, which is vital for the revival of the economy, building on the positive signals that are emerging, thanks to the sheer size and inherent momentum of the Indian market.

But, she has taken the institutional route in this regard, which means that the effort to create demand in the informal economy falls short. With overall expenditure of Rs 34.83 lakh crore, there is more money made available for capital expenditure, which is estimated to be higher by more than a third compared to last year. According to RBI calculations, capital expenditure has a multiplier effect of 2.45 immediately and 3.14 in the succeeding year. But this is not good enough for the current situation, where demand has hit such all-time lows that the viability of a large number of businesses, with its implications for employment as well as income generation has been challenged.

The finance minister has introduced a scrap policy for the automobile sector to revive demand in the sector, giving the option to go for even early scrapping of vehicles. But this is something that would appeal more to institutions rather than individuals and will help boost institutional demand for new vehicles while the need is for overall pick-up in demand.

She has also gone for monetisation of assets that are lying dormant to raise resources, which is certainly an idea whose time has come. Public utilities, including infrastructure, are capable of yielding revenue, which can be better deployed elsewhere, although it requires a safety net to protect the vulnerable sections. Safety net was first heard of when liberalisation was thrust upon the country by circumstances during the time of Prime Minister Narasimha Rao. But that was also the last one heard of the safety net, although the policy of liberalisation has been pursued by all successive governments, of which the Modi government has even gone for it at break-neck speed.

Monetisation of assets has been very successfully tried out in some countries. Dubai, which has impressed the world with its unmatched infrastructure, for instance, used the model with remarkable success. Dubai has no known income of its own, such as from oil, which its more fortunate neighbour Abu Dhabi has in abundance, although the latter comes nowhere near in Dubai’ global profile. Visitors to the emirate are stunned by the quality of infrastructure, which leaves them wondering how on earth it gets the money to do all this. But the fact is that Dubai has developed monetisation into a fine art, succeeding to raise money against even assets that are to be planned for the future.

Nirmala Sitharaman has left enough and more for her critics, who find her budget nothing short of a sell-out to the big corporates, while there is hardly anything to cheer the vast majority of Indians for whom the pandemic brought unmitigated disaster and they are still suffering its aftermath. There is hardly anything in the budget to revive employment and income generation for the most vulnerable sections and no specific step to reset their life. The agricultural cess, though noble in terms of nomenclature, will prove to be a burden around the neck of ordinary people, as it will add to inflationary pressures in the economy. Already people are struggling with their livelihoods and a general price increase is the last thing that they would want. The cut in the excise duty on petroleum products can only provide temporary reprieve as international oil prices promise no sign of a reversal of the current trend of uptick. This means that future oil shocks for common people are a given.

For the fans of state ownership of enterprises, there is more disappointment in store. New candidates have been added to privatisation and new sectors have been opened up to FDI, which means monopolies will have a field day.

Overall, Nirmala Sitharaman can be considered to have done better compared to her previous exercises, but still the performance is nowhere near what she had promised.
(IPA Service)