Budget 2021 to be a tougher balancing act than India's other annual Budgets
India’s federal budget Monday will be a much tougher balancing act
than New Delhi’s regular annual fiscal trapeze. For one thing, the pandemic has
upset business-as-usual calculations of how much to spend, on what, and how to
finance it. For another, an impatience to make up for lost time has to be
weighed against a shrinking of policy space in emerging markets: A reprise of
the 2013 global taper tantrum could compound the country’s considerable
domestic challenges.
On the first question — how much to spend — Finance Minister Nirmala
Sitharaman must simply do a lot more. Even with some loosening
of the purse strings in the final months of the fiscal year that will end in
March, Moody’s Investors Service affiliate ICRA Ltd. expects annual government
expenditure to have been broadly unchanged from the Rs 30 trillion ($415
billion) estimated before the outbreak.
The answer to what to spend on is being dictated by the fault
lines that opened after India imposed one of the world’s harshest lockdowns. Without
a safety net for workers badly affected by Covid-19, ongoing economic revival
from the June quarter’s 24 per cent loss in real output could peter out for
lack of demand.
A combination of stepped-up social spending — including on
long-neglected healthcare — and a state-led infrastructure push will make the
recovery both durable and inclusive. A fifth of the 70 million-plus Indians who
lost their services, manufacturing and construction jobs are either still
working as farmhands or are unemployed. Discouraged, many have exited the labor
force.
Comments
Post a Comment