Indian Union Budget 2021-22: In the budget, the central government should focus on the demand side instead of solving the supply related problems. A report by India Ratings, regarding the suggestions for the budget, has said that since the outbreak of the epidemic has started, the problems related to supply are being solved to increase the economy. Sunil Kumar Sinha of India Ratings said in a note that if the demand side is not taken care of then the supply side gets better due to the policies of the government and RBI, due to the lack of sufficient demand for goods and services in no time. Will start battling.
There have been indications from some high-frequency indicators that production levels had reached levels comparable to the time before Corona and that the economy had reached a better position due to festive demand. However, after showing positive growth for two consecutive months, factory output declined in November 2020. Citing this example, Sinha said that it is very important to support the demand side. Finance Minister Nirmala Sitharaman will present the budget for the financial year 2021-22 on 1 February.
The right time to change policies
Sinha said that this is the right time to change its policies and the government should remove the problems related to supply as well as demand, even if it slows down the recovery process. According to Sinha, there is nothing wrong in trying to solve supply-related problems as it was necessary to restore the supply chain that was disrupted. However, recovery may be affected due to a decrease in demand.
These suggestions are given in the report
- Spending should be increased on employment-enhancing and short-term infrastructure projects.
- A Development Financial Institution should be established similar to ICICI, IDBI and IFCI.
Poor families should continue financial support.
- More and more budget should be allocated for MNREGA as it will not only provide employment security to the people living in rural areas but will also provide employment to the labourers who went back to the village due to Corona.
- Real estate should be given more support. In this too, especially the affordable housing segment needs more support.
Micro, Small and Medium Enterprises (MSMEs) are facing problems in raising finance. They will need government support for better performance in the next financial year 2021-22.
- The government should set the priority again in the budget regarding its revenue and capital expenditure. Priority should be given to vaccination / public health on a large scale and budget allocation should be reduced or stopped on the schemes / sub-schemes related to those which have low resources.
- The fund requirements of expenditure should be met through higher tax revenue. Apart from this, adequate funds should be given to the states and the support of the centre should be ensured if needed, as most of the expenditure is in the states.
Nominal GDP claims of 14% in FY22
Sinha claims that if the government accepts some of these suggestions, then in FY 2021-22, one can see a nominal GDP of 14 per cent. Real GDP can be 9.5–10 per cent and the fiscal deficit can be equal to 6.2 per cent of GDP. Due to the lockdown imposed due to the epidemic, the GDP had contracted at 23.9 per cent in the first quarter of April-June 2020 of the current financial year. However, after that it improved and in the next quarter, it was shrinking at a rate of 7.5 per cent. It is expected that the economy will remain in the green zone in the second half of the current financial year and GDP will shrink at a rate of 7.5-8 per cent in the financial year 2020-21.