The upcoming Union Budget is a not-to-be-missed opportunity for the government to make the most of some positive developments: the steady recovery made by Indian economy after the devastation caused by the pandemic-induced lockdown as well as slowdown; the considerable decline in daily coronavirus infections and deaths; and the nationwide rollout of the Covid-19 vaccines. The Centre’s push for reforms, however, has hit a roadblock, especially in the vital sector of agriculture that is witnessing a prolonged agitation by farmers against the farm laws. Finance Minister Nirmala Sitharaman has her task cut out as she finalises a Budget that can ensure a growth rate equal to or above pre-Covid levels, but without causing disruptions that might reverse the hard-won gains.
The ongoing financial year has wreaked havoc on millions of lives and livelihoods. According to the Reserve Bank of India (RBI), the country’s economy is projected to shrink by 7.5 per cent in the fiscal ending on March 31, 2021. The International Monetary Fund and the World Bank have painted an even gloomier picture — a contraction of 10.3 per cent and 9.6 per cent, respectively. But the worst seems to be over. On the bright side, a UN report has forecast that the country’s economy could prove to be the ‘most resilient’ in South and South-West Asia over the long term.
Repeatedly accused of eschewing a dialogic approach, the government is apparently keen to prepare a Budget that will factor in inputs from a wide range of stakeholders. During recent deliberations with the Prime Minister, some top economists had suggested three ways to revitalise the economy: intensify privatisation, avoid challenging international arbitrations, and increase infrastructure spending. Former RBI Governor Raghuram Rajan has stressed the need to prioritise spending with the aim of providing relief to poor households and small businesses, which bore the brunt of the pandemic. Restoration and creation of jobs must be high on the government’s to-do list. The vaccination programme is expected to reduce Covid-19 to a footnote in public memory, but that alone won’t be enough to raise the confidence of consumers and investors. A lot will depend on well-thought-out policy interventions that inspire trust.