Column | Nirmala Sitharaman's next budget may be unlike her first two


The North Block in New Delhi which houses the finance ministry has been officially closed for visitors as Nirmala Sitharaman has started preparation for her third budget which could be different from the first and second ones.

The Union finance minister has declared her intention to make it a growth-oriented effort, raising expectations of high government spending accompanied by tax deductions which will in turn spur consumption, thus boosting all sectors of manufacturing and services. But there is also a big shortfall in tax collections which has caused the gap between government's income and expense to widen. She also has to allot more money for defence and national security due to the continuing tensions on the borders with China and Pakistan.

Sitharaman has begun discussions with ministries which are asking for higher allocations anticipating that the COVID vaccine would bring normalcy to the pandemic-hit country from April 2021 onwards. She also has to accept and implement the recommendations of the Finance Commission headed by N K Singh, which has recommended a detailed formula for the sharing of central taxes on corporate and personal income as well as Customs duties on imports. The task is a tough one because the economic growth is forecast to shrink by 7.5 percent and there is a need to fully recover and expand it by at least 5 percent over the pre-pandemic levels.

Her first budget presented soon after the huge BJP victory of 2019 was meant for an abridged part of the year as her predecessor Arun Jaitley had presented good part of it before elections to keep the voters in good humour. By the time she prepared for the second one the global economy had entered into a slowdown. On April 1 this year when the budget came into effect COVID had struck and the country was in lockdown, disrupting economy and productivity. Sitharaman's three rounds of economic stimulus have been described as mini-budgets as she tries to pull various sectors out of the slump caused by the coronavirus and the lockdown. Some economists have noted that India is still under partial lockdown due to the ongoing restrictions in sectors like education, exports, workplace, travel, tourism and hospitality.

The last finance minister who faced such a bleak prospect was Madhu Dandavate under Prime Minister V P Singh in 1990, as India was plagued by global economic distress. Dandavate's successor Yashwant Sinha, under Prime Minister Chandrashekhar (Nov 1990 to June 1991), could not even present a full budget as the minority government collapsed and elections were ordered. (However, Sinha had the last laugh as he had the opportunity to present five full-fledged budgets in the Atal Behari Vajpayee government.) While earlier finance ministers would hold discussions with industry and trade associations and receive memoranda, it was Sinha who streamlined the process by having separate meetings between the budget team and diverse expert groups consisting of economists, industrialists, labour leaders, agriculture experts and even senior economic editors. Due to the secrecy of taxation proposals in the budget, the minister and his officials heard more and spoke less.

Sitharaman would intensify her interactions outside the government this month and during January. For the last two budgets, she spent half a day at the BJP's national headquarters listening to office bearers of the party's economy wing as well as experts from different fields aligned to the BJP's thinking. She also considered the priorities of RSS frontal organisations like the Swadeshi Jagran Manch and Bharatiya Mazdoor Sangh. The strong economic team in the prime minister's office is doing its own exercise on the priority areas encapsulated in Prime Minister Narendra Modi's vision and agendas in order to integrate then into Sitharaman's proposals. But everyone in the government has agreed that it is a tough exercise whose outcome will be determined by a virus which is yet to be contained.  

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