Pick growth over fiscal considerations.

Budget FY22 must explore non-tax avenues to raise resources, such as accelerated disinvestment, long-term pandemic bonds, pledging of PSU shares to RBI, and monetisation of non-core assets

After the gloom of 2020, hope and excitement herald the arrival of 2021. The government has approved long-awaited vaccines that will, once and for all, end the raging Covid-19 pandemic. The world’s largest immunisation programme is imminent, and the time is also ripe to rebuild a stressed economy.

The government’s top priority for 2021 should be on pulling the nation through the final phase of the pandemic and enable quicker economic recovery to pre-Covid levels of growth. The government took several positive steps in this direction last year. Successive ‘Atmanirbhar Bharat’ packages were timely and provided much-needed relief to the industry. Some sectors have reported signs of recovery while others, like travel and tourism, continue to remain under severe stress. Industries that are recovering need to be supported to accelerate their growth and their struggling counterparts need policy support to get back on their feet. The need for continuous succour to the economy thus remains, and we expect to see the next set of stimulus measures included in the upcoming Union Budget.

Foremost, the Budget must prioritise growth-oriented measures over fiscal considerations. It must focus on employment generation and by putting more money in the hands of consumers—the twin engines that will boost demand. Infrastructure is one sector that has the potential to generate significant employment opportunities and high growth. Projects under the National Infrastructure Pipeline should be front-ended, with the aim that 50% of them should be completed in the next two years. The government should also consider introducing an MNREGA-type scheme for the urban poor, who suffered the most in 2020 due to the pandemic-induced lockdown. They should be involving them in public works projects such as sanitation, tree plantation, and the maintenance of roads and public places, etc. Besides these, the take-home salary of formal sector employees can be increased by implementing measures such as interest subvention on housing loans, relaxing the terms of PF contribution for employees and introducing a three-year holiday for ESI contributions.

There is a need to widen the financial avenues for long gestation projects in order to meet infrastructure development targets. Therefore, it is important to promote non-government sources of finance to the greatest extent possible. The incentive framework, introduced last year for investments in infrastructure projects by sovereign wealth funds and pension funds, can be widened to attract capital from all sources. A Development Finance Institution, similar to the National Investment and Infrastructure Fund (NIIF), can be considered to finance mid-sized companies. Such an institution can raise money from sovereign wealth funds and other long-term institutional investors. Low-cost credit can be the fuel that powers greenfield projects of industry, and the government may consider utilising a small part of foreign exchange reserves for this purpose. There is an urgent need for setting up of more banks in order to strengthen the real economy. The time is ripe to convert well-governed NBFCs into full-fledged banks, and large corporate/industrial groups should be allowed to enter the banking sector.

India’s economic growth is contingent on the robust health of its social sector. Put simply, it needs to be transformed so that every eligible Indian can benefit from the government’s welfare schemes, as well as reap the fruits of economic progress. It was heartening to see the government implement the new National Education Policy—an important first step that encourages private participation in the sector. However, much more needs to be done to achieve this objective. For instance, for-profit Higher Educational Institutes (HEIs) should be allowed to be set up, and their fees be determined by market forces. The government should also focus its energies and spending on revamping India’s healthcare infrastructure, whose fragility was exposed by the Covid-19 pandemic.

Without a moment’s delay, the spending on India’s public health facilities should be enhanced with extra spending of 0.5% of GDP every year for the next five years. Private healthcare providers, on the other hand, should be appropriately incentivised by extending tax benefits, factoring in the expenses they incurred on skill development activities to fight the Covid-19 crisis.

The focused approach being adopted for the champion sectors, through the PLI and PMP schemes, is strategic and critical to becoming self-reliant. We need similar initiatives to strengthen the domestic ecosystem for future growth drivers. For instance, start-ups whose businesses are based on the use of artificial intelligence, machine learning and other future digital technologies must be incentivised. And, seamless access to robust wireless internet services is critical to their success. The government must allocate substantial funds to ensure that the Prime Minister’s Wi-fi Access Network Interface is implemented successfully. This game-changing project will spawn many small businesses which can leverage the connectivity offered.

As the finance minister spells out the Budget for 2021-22, economic revival and growth should be prioritised irrespective of the financial considerations. New non-tax avenues should be explored to raise additional resources. Besides accelerating the disinvestment programme, the government may consider issuing long-term pandemic bonds, pledge PSU shares to RBI, monetise non-core assets of government departments as well as ‘enemy properties’.

It is that the Covid-19 pandemic has created an unprecedented economic crisis. However, as Winston Churchill remarked, “We must never let a good crisis go to waste”. Budget 2021-22 is a golden opportunity to usher in landmark reforms that will unleash the animal spirits of India’s economy. It is also a moment for the country to bury the ghosts of 2020 and renew its tryst with destiny. The honourable FM’s Budget should lay the foundation for India to embark on that journey.