Thrifty Budget: India proposes mega spending push

New Delhi: Finance Minister Nirmala Sitharaman has proposed to unleash a massive fiscal expansion in 2021-22 on the back of fire sales and cesses, to revive India’s pandemic-battered economy.

Accordingly, she proposed to increase the capital expenditure by 34 per cent in Budget 2021-22 in comparison to the previous fiscal BE (Budget Estimate).

In her Budget speech that lasted for around 1 hour and 45 minutes, she doled out enormous amounts for railways, roadways, health care, education as well as the agriculture sector.

Notably, the fiscal expansion proposes to increase the capital outlay to Rs 5.54 lakh crore from Rs 4.12 lakh crore spending target in BE FY21.

Also, she proposed to institute a ‘Land Bank’ magnetization company along with an asset management and reconstruction company or a ‘Bad Bank’ and a Development Financial Institution (DFI) which will fund infra projects.

Besides, the finance minister laid out a new import structure along with proposals for a conducive environment to usher in investments into FinTech, insurance and Start-ups.

Further, the minister set aside Rs 20,000 crore for public sector bank re-capitalization and gave a push to digital payments and research in Artificial Intelligence.

On the other hand, to shore up the Center’s revenues, she proposed an asset monetization pipeline.

She also set a massive divestment target of Rs 1.75 lakh crore.

However, Covid-19 prevented the Center in achieving the FY21 target, with collections only coming in at Rs 19,499 crore.

In FY22, the Centre plans to divest two public sector banks, as well as a state-owned general insurance company.

Even the IPO route will be considered for LIC to augment falling revenues.

Sale of certain projects such as city gas pipelines, roads and ports are expected to give some relief to the Center.

Nonetheless, an agriculture Cess on petroleum products, GST and other high-end items is expected to fill up Center’s coffers.

Consequently, the fiscal deficit for next year is set at 6.8 per cent from 9.5 per cent for FY21, out of which the Centro plans to borrow Rs 80,000 crore by the end of the current fiscal.

This is Sitharaman’s third and most significant Finance Bill to the Parliament.

Image courtesy of (Photo: Twitter)

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