By Vivek Pattanayak in Bhubaneswar, February 15, 2021: A budget “like never before” has been delivered by the central government and has been promptly dismissed as budget “let down like never” by the Opposition. Usual euphoric response from India Inc. included comments like ‘a very reformist budget’, ‘expectation from the budget that we should be very liberal in terms of the target of fiscal deficit.

Box ticked’, ‘budget visionary and growth oriented’, ‘pathbreaking inclusive budget’, budget attempts to put a medium to long-term foundations to the emergency measures undertaken by government reviving growth impulses’, ‘clear headed’ and‘raft of prudential measures. Soon after the placing of the budget the stock market skyrocketed. A certain section of media called it bold and transparent while a noted professor wrote that the Finance Minister has thrown caution to the wind by ignoring the directions of Fiscal Responsibility Act while prescribing a high fiscal deficit.

All these comments were preceded by smugness expressed earlier by saying the greenshoots are seen and there is V shape recovery afterthe bail-out packages were rolled out. Some describe the budget to be transparent because a substantial amount of off-balance sheet expenditure has now been included inthe budget. Some say it is bold because the government hasprojected high level of fiscal deficit.If one analyzes the balance sheets of public sector undertakings for last couple of years one would trace a lot of expenditure in their accounts which normally should have been done by the government.

Fact remains that the pandemic struck at a time when the economy was already in the grip of growth slow down mode. GDP growth was the lowest in eleven years. It was 4% in 2019-20. Since last budget, size of the economy has reduced from Rs 2.21 lakh crore to Rs 1.24 lakh crore.The budget deficit would be 9.5% in the current financial year and would go up to 6.8% in the year 2021-22. Nomura expects that Fitch Rating agency would downgrade the Indian economy. As it is, the Indian economy is now rated a notch above junk grade. Further down grade would increase the cost of debt to the government.

The question arises why so much of importance should be given to the budget which is in nothing but an estimate of receipts and expenditure as is stated in Article 112 of the Constitution. Actual revenue can vary and so also expenditure for myriads of reasons. If one sees the budget documents year after year one can see the variance.

Here comes the question what impact the budget has on economy. Very often it is stated thateconomy is doing very well. It is vibrating or not doing so well and is under decline or not doing well at all. What all these observations mean? Also, one should examine to what extent the budget has played a role.

When growth is good there is optimism in some quarters and encomiums are showered on the government. During the period of 2004 and 2012 when growth was high, many politicians, intellectuals, and civil society activists used to say GDP is not everything. There were raising issues relating to poverty level, inequality, corruption, and environmental pollution and consumer price index and inflation etc.Even after 2014, there were disappointments regarding outlay under health sector anddissatisfaction on education sector.

Nevertheless, in India health of the economy is known by several factors like growth rate, fiscal deficit, trade deficit or current account deficit, level of foreign exchange reserves, consumer price index employment level, inflation level, stock-market, real estate price, prices of gold and silver,value of Rupee vis-as dollar, yen and Euro etc.

Undoubtedly the outlay ofthe central government has significant effect on economy. Besides, the State government budgets have their impact. Further the municipalities and panchayats contribute also to economy. Apart from these public budgets, corporate houses whether in public or in private sector play a big role in the economy in addition to small business whether organized and in unorganized sector apart from agriculture and the allied activities.

Needless to say, that no government can produce a budget which would be able to satisfy all categories of people. Having said all that if one sees the present economic scenario of the country one sees unemployment is unusually high particularly among young, prices of consumer goods like vegetable, milk, meat, chicken, fish are having upward mobility, diesel and petrol prices going up.
It is true Sensex has touched all time high having crossed 50000 mark. It should be clarified at this stage that this reflects the market capitalization of 30 identified stocks listed in the Bombay Stock Exchange. If one sees the aggregate figure it remains around 33,000 to 35000.Moreover number of people who participate in the stock-market is insignificant.It isequally true that stock-market rise has created more of inequality as wealth creation has taken place more among the fortunate wealthy few.

Further it is equally relevant to say even before the onset of pandemic exports had been falling, imports have been depleting foreign exchange although it has not assisted in employment generation as import has fallen. Manufacturing had not performed well, and service sector did not show much sign of vibrancy. Only sector which has shown some spark is agriculture despite pandemic thanks to good Monsoon. Three farm laws have created unrest at least in three agriculturally developed States in massive scale. What would be its long-termeffect unless timely resolved time would say?

Bank rates have remained low. Deposit rates have fallen, not a happy augury for the middle class and elderly pensioners. At the same time, the corporate sector has not taken advantage of low bank interest rate. Is there any spectacular capex in the private sector? One can study the balance sheets of listed companies which are available to stock-exchanges to know whether any expansion is taking place and new projects are likely to be set up.

Non-performing assets of public sector banks are well known. The level of credit expansion had reached all time low in recent years. Effort to make banks vibrant Bank Board Bureau tried without much success. Bankruptcy Code a novel idea brought in by late lamented Arun Jaitley has shown result to some extent. Its efficacy has been constrained by lackof risk-taking appetite of senior executives.Very righty Chief Economic Advisor recently identified three Cs as the stumbling block.

Now the idea of bad bank after years of wait has taken root during the budget although ownership whether in public or private needs to be finalized. Similarly, Development Finance Institution (DFI), Agriculture Infrastructure Development Fund, Infrastructure Financing institution and robust attention to MSME sector with massive allocation are most appropriate ways forward. All these measures could have been taken much earlier even halfway into the last tenure of the present government when economy showed signs of limping.

All these new ventures must be implemented as expeditiously as possible. This is not time for criticizing bureaucracy. Bad workman quarrels with his tools.In stead of throwing the baby with bath water patience, equanimity and maturity are most needed now. It is equally counter-productive to distance oneself from private sector and have suspicion towards that domain. Talent, merit and integrity also exist there. There is no point in blame game. Cooperation, consultation, and consensus building are paramount now otherwise a budget as wish list would remain only as a post-dated cheque hopefully not on a crashing bank.