Budget 2021: A Few Old Ideas But Exciting Intentions; Now EXECUTE!

Video Producer: Shohini Bose
Video Editor: Vivek Gupta
Camerapersons: Athar Rather, Shiv Maurya

I called her “Superwoman” on Budget Day, when she ignited the markets with her “no-tax budget.” A few days have now passed, I’ve slept over the budget’s math and promises, so here’s a more reasoned assessment.

If you look at just the budget numbers, they are unremarkable. That’s quite understandable. After all, despite all exertions, the economy next year (FY 21-22) will simply be equal in size to what it was in the previous year (FY 19-20), with the current year’s plunge creating a turbulent V-shaped link between the two:

• Keynesians are commending the sharp uptick in the fiscal deficit to 9.5 percent for the current year. But nearly 2 percentage points of this increase has come from the government recognising prior period expenses, viz the food subsidy parked with FCI and unpaid bills of fertiliser companies. While such transparency is most welcome, it should temper the “we have spent, we have spent, we have spent” assertion.
• Has defence spending gotten short shrift? Remember, capital expenditure on defence items was pulled up by nearly a fifth in the current year, from about Rs 1.15 lakh crore to Rs 1.37 lakh crore. So yes, it’s flat but still much higher than estimated for the current year.
• The outlay for health and family welfare has actually shrunk. But there is a one-time provision of Rs 35,000 crore for the COVID-19 vaccination effort. Of course, the compensatory axe has fallen on education and MNREGS, but well, how can you win ’em all?
• There is inexplicable timidity around disinvestment proceeds. Just the LIC IPO and BPCL sale should fetch the government Rs 1.75 lakh crore, the budgeted number. But then, what about Air India, Concor, Shipping Corporation, Pawan Hans, and BEML? Why is the government not confident about pushing them through?

Budget 2021: Couple of Boo-boos

Now, we jump from the math to a couple of the boo-boos:

• The creation of a new Development Finance Institution is a leap back to the bad ole’ days of directed, state-vitiated lending. How can we forget the awful IDBI train-wreck or IFCI scandals?
• Similarly, why spend precious time and resources in creating one more “bad bank”, when there is a rapidly maturing ecosystem of professional/private ARC/AMC (Asset Reconstruction Companies controlled by Asset Management Companies) structures which could easily handle the volume of new work? The government should merely strengthen the regulatory architecture of an emerging industry, instead of jumping into the fire itself.

Budget 2021: Gives a Thumbs Up to Power of Free Markets to Create Wealth

Alright, that’s enough! Lest we forget, Budget 2021 is EXCITING, period. Its intentions are bold, and it gives a thumbs up to the power of free markets to create wealth by:

1. Privatising at least two public sector banks and one general insurance company
2. Listing LIC and selling IDBI Bank, BPCL, Air India, BEML, Concor, Pawan Hans etc etc
3. Monetising existing roads, railways, and oil/gas pipelines via investment trusts; allowing them to issue zero coupon bonds and pick up FPI cash; giving them relief on withholding taxes and treaty rates
4. Selling old airports and surplus land via SPVs
5. Investing Rs 1.18 lakh crore in building new highways; putting Rs 1.1 lakh crore in new railway assets
6. Investing, investing, investing… growing, growing, growing!

So, finally, there is one BIG risk. That’s the ability of our state to execute this ambitious agenda. I recommend the government should induct exceptional talent from everywhere – markets, corporations, universities – to ensure we get the job done. Else, it could be one more exciting moment that could get lost in the dreary sand of dead habit.