Nirmala Sitharaman at a CII meet in December 2020 stated: “100 years of India wouldn’t have seen a budget being made post-pandemic like this,” as mentioned in The Wire.
Thinking about this statement, I wonder if this was a statement of fact that parts of the budget-making process had never been done virtually, post the pandemic, or is it giving hope that the final results of the budget will be something that was never seen in a century.
It’s been almost a year that India’s economy has been low since the novel coronavirus hit the country. India experienced a great fall in its economic activity since the beginning of announcing the GDP data. The fall was very sharp compared to most major economies of the world.
Effects of this unprecedented budget fall:
Due to this unexpected fall, large sections of the population are severely affected. There is the crisis of unemployment, a rise in the demand for work under the Mahatma Gandhi Employment Guarantee Act, declining incomes due to unemployment and a percentage reduction in the salaries of those employed, business failures and increasing “non-performing loans,” rising inequalities, similar heavy fall in the government revenues, while at the same time, rise in the fiscal deficit of the budget.
The worst part about all this is that it all happened in spite of the government’s ‘Atmanirbhar Package’ which was a word of Rs. 20 lakh crore. Will that budget help resolve even if the number of basic problems still exists in large numbers, in spite of the government’s package? However, the Union Budget for 2020-2021 had calculated expenditure of Rs 30 lakh crore.
What did the package do?
The ‘Atmanirbhar Package’ did no great additions to the budget expenditures because most of it was loans and credit along with many continuing schemes from previous budgets that didn’t require added provisions. Since the rise in the fiscal deficit, the increases were pretty much balanced by the cuts made in the expenditure by the ministries. In all, there was a one-step upward rise in budgetary expenditure in 2020-2021.
Given the fact that the economy has contracted, and will remain less than 2019-2020, the overall revenues will remain shorter. Roughly, the expenditure for the year 2020-2021 will be of similar size. Citizens who are suffering from the economic downturn due to the pandemic situation, cannot be supported unless the government is willing enough to allow a sharp rise in the fiscal deficit.
Hence, a considerable motivation to the economy and support for those who are suffering due to the novel coronavirus is improbable. It will be somewhat the same in the budget for 2021-2022.