In one of her interactions with the media post the budget presentation, Union Finance Minister Nirmala Sitharaman said she had not had the time to track the stock market movements during the day. It was indicative of a professional approach to budget-making. She further said she would not even get into the “alphabet-soup” of whether the economic recovery will be V-shaped or K-shaped.
The FM may not have heeded the markets but no budget in recent memory had become such a favourite of the stock market. At day’s end, the Sensex was a massive 2300 points higher, a gain of about 5%. In that sense at least, this was a budget “like never before”!
The fears about fiscal deficits seemed to have been dumped into the trash bins of academic discussions as the market greeted budget announcements as being growth-oriented, reformist, transparent and bold.
A whopping Rs 18.5 lakh crore of borrowing during the current financial year and a high Rs 15 lakh crore next year which would result in fiscal deficits of 9.5% and 6.8% respectively did not dampen spirits. On the other hand, the transparency and the boldness in coming up with an “as-is-where-is” position of the government’s finances was welcomed.
There were four major announcements which augur well for the immediate term growth.
• There is a clear emphasis and action on infrastructure development. The creation of a National Bank for Financing Infrastructure and Development (NaBFID) for which the FM set apart Rs 20,000 crore is a move which was long overdue. After the erstwhile Development Financial Institutions like ICICI and IDBI morphed into banks, there was a vacuum waiting to be filled. More so, when there is a National Infrastructure Pipeline in the works, estimated to cost over Rs 111 lakh crore, up to 2025.
• After Swatch Bharat, the next big move seems to be in drinking water for rural areas. The Jal Jeevan Mission has an allocation of Rs 50,000 crore against Rs 11,000 crore in the previous year. If executed within 2021-22, it will be a major milestone in the nation’s development journey. The thrust is on right lines.
• Capital outlay for next year is higher at Rs 5.54 lakh crore, an increase of 35% over last years initial allocation. It is now reported that about 30 km of roads are being laid per day. Indeed, road construction is an activity which has gained momentum and this will give a fillip to employment generation as well and multiplier effects in downstream units.
• The government did not vacillate in announcing its intention to disinvest. Last year was a washout. So, hopefully if this year’s target of Rs 17,5000 crore can be met, that would provide further momentum to stake sale in some more units. Fears of disinvestment leading to capitalist takeover of the commanding heights are overstated. The worry, on the other hand, is whether the targeted sales can be achieved. Critics must understand that people are not exactly queuing up outside the government’s disinvestment window. Also, the move to allow up to 74% FDI in the insurance sector is a natural corollary to the already-allowed norm of 74% in banking.
The prime minister had, in the run-up to this budget, stated that there have been a few mini budgets as part of the Atma Nirbhar packages. The rest of the announcements in Budget 2021-22 are indeed follow ons to the announcements made earlier.
There were no changes in taxes, except for an Agri Infra Cess which the FM says will be neutral as far as consumer prices are concerned. So the cess is only to ensure that the money collected goes for that specific purpose, Nirmala Sitharaman clarified later in the day.
For Kerala, there was reason to cheer. Promise of 1,100 km of roads at a cost of over Rs 60,000 crore and specific provisions for the second stage of Cochin metro and the fishing hub at Kochi jell with the state government’s eagerness to attract investments, new projects and development.
Indeed, Kerala has come a long way since the time the state requested NHAI that we need not have roads wider than 30 metres, against the national minimum of 60 metres.
(The author is a top Indian bank executive. Views expressed here are personal)