Budget 2022: FM shouldn’t shy away from spending her way to push growth

New Delhi: Finance Minister Nirmala Sitharaman reviews the progress of the LIC IPO, in New Delhi, Friday, Jan. 7, 2022. Photo: PTI

With the advance estimates for the growth of the Indian economy coming in at above 9% for 21-22, Finance Minister Nirmala Sitharaman will be on a stronger wicket when she presents this year’s budget three weeks from now on February 1.

Buffetted by the pandemic in the first full year of her stewardship of the Ministry, the gritty lady had to undergo a baptism of sorts by Covid even as she came out with a slew of major packages under Prime Minister Modi’s Atma Nirbhar concept last year in an effort to support economic activity across various sectors.

Overall, the packages have worked well and going by current indications, India is the fastest growing major economy this financial year, even ahead of China, though size-wise, we remain far behind.

According to World Bank’s projections, “After a strong rebound in the first half of 2021”, real GDP growth in China will reach 8 percent this year, before moderating to 5.1 percent in 2022. “The slowdown reflects less-favorable base effects, diminished support from exports, and the government’s continued deleveraging efforts”.  The IMF had earlier stated that India, on the other hand, was forecast to grow at 9.5 per cent in 2021, which is nearly double the growth prospects for the US and Euro area and higher than that of China.

Another favourable macro-economic area for India has also been its external front — booming exports of over $30 billion a month, very high forex reserves of $ 630 billion and a relatively stable Indian rupee. If internal domestic demand/consumption and consequently growth can be kept up, we shall be able to achieve the $ 5 trillion economy in this decade itself, which should be our aim.

Both the Government and the RBI had taken a number of coordinated pro-growth steps which have ensured that the lockdowns and the net negative growth in 2020-21 have not led to large-scale problems for the poor and those in the informal sectors. A buoyant Agriculture sector which maintained a growth rate of 4% during last year even when all other sectors contracted also played a major role in ensuring that there was no distress for people in terms of their basic requirements.

The Central Government’s own PM Garib Kalyan Yojana under which free rations of 5 kg of cereals per person are being given to 80 crore ration card holders till March, 2022 has been a salutary step in seeing to it that despite collapse in incomes, food was available in plenty across the country and there was no deprivation or starvation. In a large lower income country, this was no mean achievement and credit should go in full measure to the Modi Government in deciding on continuing the free ration scheme.

In this backdrop, what would be the key expectations from the upcoming Union Budget? Which will be the thrust areas as the economy experiences a rebound? Will the shadow of the “third wave” of Covid dampen the spirits this year? What should the Government do?

It wont be a surprise if the “Swatantrata ka Amrit Mahotsav” theme becomes central to this year’s budget as we celebrate the 75th year of our independence. In order that the momentum of recovery is sustained, the Government should go for expansionary policies and increase outlays for infrastructure and spending on health/education without bothering too much about the deficit.

It has now been accepted, as part of Modern Monetary Theory (MMT) that as long as any Government’s debt is largely internal, spending on essential sectors should not worry policymakers. We lived with a nearly 9.5% fiscal deficit in 2019-20 and this year’s revised estimate is likely to be about 6.5%. We can afford to have a fiscal deficit in excess of 6% and on that premise, here are 10 expectations from Budget 21-22, mainly from a growth and welfare perspective.


1. The size of the budget should be not less than Rs 37 lakh crore, in alignment with the economic growth projections for 2022-23. Last year’s budget was for about Rs 35 lakh crore. A higher outlay underlines a higher spend by the Government and is required in the current circumstances.

2. Latest reports indicate that compared to last year, rural demand has been slackening. Perhaps, the non-agricultural income in rural areas has been hit because of which rural demand is affected. The outlay for MNREGA which is one of the “Core of the Core” schemes of the Union Government has to be at least Rs 100000 crores.

3. Even though the Ministry of Surface Transport has been rated a star-performer in the last few years, the pace of road construction has surprisingly slackened this year. The total length of roads laid up to November 2021 (5118 km) has been lower than the total length of roads constructed up to the same period in 2020 (6207 km). However, as road construction is an important growth accelerator, outlay for NHAI and roads has to be kept at least at Rs 1,30,000 cr, a little higher than the budgeted Rs 1,18,000 cr for last year.

4. Including the additional subsidy for phosphatic fertilisers which was made after last year’s budget, the revised total fertiliser subsidy for 2020-21 would be about Rs 1,00,000 cr. This has to continue.

5. Likewise, the PM Kisan cash transfer outlay has to be a minimum of Rs 65,000 cr.

6. The allocation for the Jal Jeevan Mission/National Rural Drinking water mission which is one of the major moves of the Modi Government was Rs 50,000 cr. This has to be increased by at least Rs 60,000 cr.

7. With tax revenue estimated at about Rs !6 lakh crores, net to Centre, we do not expect any changes in the tax rates.

8. With the Assembly elections in five States including UP and Punjab looming large, agriculture and rural development allocations can only be expected to go up.

9. The National Health Mission/outlay for vaccinations is likely to be much higher than the budgeted Rs 37,000 cr. We should have at least Rs 60,000 cr for health this year.

10. The Government can borrow around Rs 15/16 lakh crore in 2022-23 and should not fight shy of a fiscal deficit of about 6% for the next year.

These ten steps would broadly be supportive of growth and be in sync with the accommodative policy so far adopted by RBI and the Government. Here’s wishing the FM, the best of budget-making.

(S Adikesavan is a top executive with a bank. Views are personal)

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