All eyes will be on the upcoming budget for 2021-22, as the Indian economy is expected to be on the path of revival after the disastrous preceding year caused due to the COVID-19. Now with the increased mobility, business operations functioning with fewer disruptions, the Indian economy is expected to make a swift turn-around.
Moreover, with the roll-out of the vaccine in a few months, the economy is likely to receive the required boost as more people venture out and engage in business.
Currently, the economy of the country is in a precarious position. India had in 2019 overtaken the UK to become the fifth-largest economy in the world, and now it has slumped down to the sixth spot in 2020 due to the pandemic which necessitated a strict lockdown–jobs were lost, businesses were shut down, and consumptions decreased significantly.
Finance Minister Nirmala Sitharaman has a tough job ahead of her as she prepares the budget for the next fiscal starting April 2021.
The government’s spending plans particularly on infrastructure and social sectors as well as relief to sections hit by the pandemic and lockdown will dictate the pace of recovery, PTI quoted analysts as saying.
Due to the COVID-19 crisis, the rate of GDP growth sank to a more than ten-year low of 4.2 percent in 2019, down from 6.1 percent the previous year.
GDP in April-June was 23.9 percent below its 2019 level, indicating that nearly a quarter of the country’s economic activity was wiped out by the drying up of global demand and the collapse of domestic demand that accompanied the series of strict national lockdowns.
Meanwhile, Union Finance Minister Nirmala Sitharaman on December 17 said that any amount of government intervention will not be adequate to deal with the impact of novel coronavirus on the economy.
Addressing an event of the Indian Chamber of Commerce (ICC) virtually, Sitharaman said that although the economy was witnessing a revival in early 2020, the pandemic impacted the recovery. Since March, she has announced a number measures to support the economy and businesses amid the pandemic, and more measures are expected going ahead. So far the stimulus measures by the government and the Reserve Bank of India (RBI) add up to about Rs 30 lakh crore.
The Cabinet has already approved strategic sale, along with transfer of management control, in over 25 public sector companies, including Air India, BPCL, Pawan Hans, Scooters India, Bharat Earth Movers Ltd (BEML), Shipping Corporation, Cement Corporation, and some steel plants of SAIL.
The process of sale of BPCL and Air India is ongoing and the government has received ‘multiple expressions of interest’ in these two companies. Sitharaman mentioned that the government has taken several measures to support the economy but no amount of intervention will be adequate to deal with the crisis triggered by the COVID-19 pandemic.
The Finance Minister also said that public expenditure on infrastructure will be kept up. Citing interest of foreign investors, she said that sovereign wealth funds and pension funds are keen to come to India.
The government has set an ambitious Rs 2.01 lakh crore disinvestment target in the current fiscal. However, COVID-19 pandemic has derailed the stake sale plans and so far over Rs, 11,006 crore has been mopped up from minority stake sales in various CPSEs.
The finance minister said public expenditure will continue particularly for infrastructure and with the tax concessions that the government has doled out several sovereign funds and pension funds are keen to invest in infrastructure projects outlined in the National Infrastructure Pipeline (NIP).
The government”s stimulus spending in response to the COVID-19 crisis has been significantly more restrained than most other large economies.
The actual fiscal cost has been estimated at around 1.3 percent of GDP, including 0.7 percent for the incentive programme whose expense is spread over five years.