BackThe Union Budget has got its agenda right
It strikes all the right notes by prioritizing growth even as inclusive development, infrastructure expansion, climate change imperatives and digital innovation are given greater attention
PremiumPolicymaking, like sport, is a glorious game of timing and building on the momentum. It is also about the art of identifying the right lanes where, and when, the economy needs to move from a trot to a canter to gather pace and gallop ahead. This has certainly never been truer than it is in these times when an unprecedented global pandemic has turned many known knowns into known unknowns and unknown unknowns.
There is a need to recognise that finance minister Nirmala Sitharaman has presented a growth-oriented reformist budget in what is still a very uncertain global economic environment. And she must be lauded for maintaining the fiscal deficit at 6.9% of gross domestic product in 2021-22, with a 6.4% target for 2022-23. The budget rightly focuses on inclusive development, continued infrastructure push under the transformative PM Gati Shakti plan, climate change and energy transition, and digital as well as start-ups focus as the four important pillars of growth.
The government’s desire for inclusive development comes out clearly through a multitude of initiatives, be it the “Har ghar nal se jal" programme, the “housing for all" plan, the “vibrant villages" initiative or the move to turn the 1.5 lakh post office branches into “bank" branches.
The other critical focus area is infrastructure, and the transformative PM Gati Shakti plan clearly highlights the opportunity as well as the need. The move to step-up capital expenditure sharply by around 35% to ₹7.5 trillion is a clear signal of intent and will attract more private investment, boosting the capital expenditure cycle, thus spurring growth and catalysing the creation of urgently-needed infrastructure and jobs.
A big change that will impact lives, lifestyles, industry and policymaking is climate change and the commitment towards `net zero’ goal. Prime Minister Narendra Modi announced in November in Glasgow that India will achieve the goal by 2070, which shows the political resolve to walk the talk on climate change.
The most visible transformation is seen in the changes that are sweeping the automotive industry, with the speed at which countries and consumers are adopting electric vehicles (EVs). In fact, BCG’s forecasts predict that by 2026 EVs will account for more than half of the light vehicles sold globally—four years sooner than anticipated earlier. The policy on battery-swapping that will be brought out with interoperability standards will boost the EV ecosystem in India.
India’s leading role in institutionalising the International Solar Alliance (ISA), raising the domestic renewable energy target to 500GW by 2030 and the move to allocate ₹19,500 crore in production-linked incentives for solar modules to facilitate domestic manufacturing to achieve the ambitious goal of 280GW of installed solar capacity by 2030 is noteworthy. The government’s focus on encouraging research and development expenditure in sunrise areas such as drone technology in agriculture, artificial intelligence, genomics, clean technology and green energy will have a cascading multiplier effect on economic growth in the longer term.
Start-ups will continue to remain one of the most talked-about features of the India story. The spirit of entrepreneurship and innovation, driven by a sharp problem-solving focus, will turn the country into the world’s unicorn capital. It will be a coveted status to possess.
The budget has done its job by providing a conducive policy, and a tax as well as regulatory architecture that allows start-ups to flourish. The move to extend the existing tax benefits for start-ups by one more year, for example, is welcome, as are the blended financing options provided for Agri-tech companies. There is no gainsaying the possibility of such companies dominating India’s unicorn landscape in the next five years, much like Ed-tech and Fin-tech did in the last five.
The finance minister has ticked most of the boxes in her budget. The clear message coming out of it is that the government recognises start-ups as one of India’s primary growth and job-generation engines.
It strikes the right notes at the right time and demonstrates the government’s priority of driving economic growth with a continued reformist mindset and a focus on inclusive development, infrastructure push, embracing digital transformation, encouraging start-ups and an agenda on climate change as well as energy transition. The question is: Is India ready to make the leap into the double-digit growth bracket and when will we surprise the Pundits and make that happen? I believe it is very achievable, in fact, it is our calling—we have to make it happen.
Alpesh Shah is managing partner, BCG India.
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