The necessary condition for the Union budget for 2020-21 to be a success, defined as its ability to haul India economy’s out of its current slump, was that the sclerosis be acted upon. On this, Finance Minister Nirmala Sitharaman’s second budget may appear to have delivered, at first glance. It is a high-spend budget. Whether it will prove sufficient, however, is unclear. Its emphasis is neither on pushing cash around the country to revive consumption directly, nor, despite the hype in its run-up, on infrastructure and other mega projects that could have longer-range multiplier effects on the economy. The national infra pipeline, in particular, is far too reliant on large loans than seem realistic. The allocations that dominate the budget are for rural and social sector schemes, whose impact is hard to assess.

The fiscal deficit for 2020-21 is projected at 3.5% of gross domestic product (GDP). This is down from 3.8% in 2019-20, but may end up higher than expected, unless tax revenue trends reverse smartly. While an enlarged divestment programme and other plans could possibly come to the rescue, overall, the accuracy of the budget’s forecasts remain uncertain.

On easing credit flows, the budget offers little beyond more money for an old plan to aid shadow banks. True, some good moves made earlier could declog the system, but given how slowly it’s going, it would take a brave analyst to bet on anything more than a slight uptick in private investment. Public expenditure is rarely as efficient as the private kind, but the government has had little option but to play a larger role. That’s just the way it is. We may simply have to get used to a lower growth trajectory than we saw in India’s boom years.




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