Business Desk, ETV Bharat: With the Union Budget 2021-22 just nearly two months away now, the government would have to address much bigger challenges this time compared with last year’s budget, according to a top economist.
Dr. NR Bhanumurthy, vice-chancellor of Bengaluru-based BASE University, said that the main task for the government would be to integrate the recommendations of the Finance Commission into the Budget.
Earlier this month, the 15th Finance Commission submitted its report for the period 2021-22 to 2025-26 to the President, making recommendations on wide-ranging issues like tax devolution to states, local government grants, disaster management grants etc.
The report will be available in the public domain only once it is tabled in the Parliament by the government.
“We don’t know about these recommendations yet nor about their implications on both Centre’s and states’ finances. But, I think Finance Commission recommendations would throw light on a different framework or roadmap for achieving fiscal targets,” said Bhanumurthy.
“Also, since the finance commission deals with tax devolution to states and other local bodies, a lot of state budgets would also depend on the report and subsequent implementation by the Centre,” he added.
Creating $5 trillion economy
Post the coronavirus outbreak, as India went into complete lockdown mode for nearly three months beginning 25 March, the economy took a major beating with the GDP shrinking 23.9% in the April-June period.
To revive the economy, a slew of stimulus measures has been announced so far this year to the tune of Rs 29.87 lakh crore.
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However, Bhanumurthy believes that the actual fiscal cost of these measures is still in single digits in terms of percentage of GDP (gross domestic product), which leaves scope for further action.
“The Budget this year would focus on the next five years and my feeling is that the government might bring back the ‘$5 trillion economy’ target for 2025-26,” said Bhanumurthy.
“I think the challenge for the coming budget is much larger than the last budget as the fiscal situation in FY 2021-22 will be very different on the back of post-Covid recovery,” he added.
Building health care infrastructure
In view of the Covid-19 experience, Bhanumurthy observed that the health sector of the country would also need key policy reforms, some of which may need quick implementation as well, may be within the next fiscal year itself.
He also stressed on the fact that since the country would now be looking at post-Covid economic recovery, renewed focus would be needed on the targets the government had fixed for itself in the previous years like Housing For All by 2022.
Employment challenge
Bhanumurthy believes that the employment situation heavily depends on the manufacturing sector and the government has already started working towards boosting its share in the economy from the current 15-16% to 25%.
“The government has taken various steps like new labour codes, farm laws, etc. Besides, FDI reforms would also open up many sectors for foreign capital,” said Bhanumurthy.
“All these things should help the manufacturing sector in a big way and unlock employment potential,” he concluded.
