By A Special Correspondent
First publised on 2022-01-23 08:29:13
This year's Union Budget will be presented at a time when the economy has gone through the ups and downs of two debilitating years of pandemic-related disruptions and three waves of infections out of which the first wave was hugely disruptive for the economy while the second wave brought the country's health infrastructure to the brink of collapse. It will also be presented at a time when there are signs of economic recovery but also signs of distress in some sectors, rising unemployment, rising inflation and upheavals in the informal sector. Hence, without doubt, the Budget needs to rise above just being an accounting exercise and needs to provide a vision, a roadmap of growth in the medium term.
Although economic indicators such as GST collection, Product Manager's Index and exports are all showing healthy improvement since the festive season began in September this year after the country recovered from the second wave of infections, demand has not actually climbed up substantially. Indian economy was suffering even before the pandemic as demand was sluggish. Hence, to compare current demand for goods and services with the 2019 levels will not suffice. Further, due to inflation, sales figures might seem high but are actually not above pre-pandemic levels when compared on the basis of units sold, except for some sectors like automobiles (despite shortage of chips).
Hence, the budget must pay attention to ways to generate demand. Only rising demand for goods and services will make the wheels of economy start turning at the desired speed by infusing a spirit of positivity. Economic activity will pick up substantially if the government starts investing in infrastructure projects. That will create demand for the core sector and the cascading effect will invigorate the entire economy. Demand from semi-urban and rural areas will be generated when the agricultural sector performs well (which it has been doing despite the pandemic), government buys produce from farmers and the mandis operate well and the government keeps providing work and funds for MNREGA.
The Budget also needs to identify sectors which are still in distress and provide them the help needed to get back in shape. It also needs to ease rules for new-age businesses. It must also speed up the divestment process (which came to a standstill in the last fiscal) to generate funds. With the government doing a good job of managing the fiscal deficit even in the face of rising expenses, the Finance Minister will not be overly worried about this. But the time has now come for the government to seriously think of making huge investments in infrastructure projects to kick-start the economy. All indicators show that the economy is ready to leap ahead - it needs a strategic push and only the government can provide that.
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