India's Finance Minister Nirmala Sitharaman proposed the Union Budget 2021 on 1 February 2021. There are several constructive and opposing aspects of this budget which will affect different sectors of the economy. Before the Budget 2021 was disclosed, the International Monetary Fund Chief Gita Gopinath already listed out some essential areas that she withstands about Indian government's agenda for Budget 2021. Gita Gopinath is an Indian American economist who has been the Chief Economist of the IMF since 2019. In that role, she is the Director of the IMF's Research Department and the Economic Counsellor of the Fund.
Gita Gopinath illustrated that the budget 2021 should have maintained composure on the future because the economy has suffered immensely due to the novel coronavirus pandemic. While agricultural and infrastructure should be the priority, reforms to stimulate economic recovery should also mark huge on the government's agenda for budget 2021, and this can similarly be seen in the Budget disclosed by the Finance Minister. Moreover, she also talked about one of the most controversial laws till now, the three farm laws. The farm laws which were enacted in September 2020, have been projected by the Indian government as major reforms in the agriculture sector, which will remove middlemen and allow farmers to sell their products anywhere in the nation. In an interview with The Hindu, she explained, “These particular farm laws were in the area of marketing. It was widening the market for farmers as they will be able to sell to multiple outlets besides the mandis, without having to pay tax. This has the potential to raise, in our view, farmers' incomes”.
The RBI Governor Raghuram Rajan also keeps a few similar views like Gita Gopinath. He speculates that the support by the government can be extended towards the underprivileged families. Speaking to Economic Times, Gita Gopinath said, “If you look at the social sector, there is a good argument to extend some of the pandemic support measures that will provide lifelines to poor households”. She similarly insisted that the Centre has delivered expenditure in the health sector as well as to Micro, Small and Medium Enterprises (MSME), and the following phase would be to detect if that policy is operating satisfactorily. “On the health front, expenditures have been put in now to make sure that the vaccinations roll out at a faster pace. For MSMEs, a lifeline was provided mostly in the form of liquidity. It's important to see how well they are working”, Gita Gopinath added.
Banks are likely to detect an accumulation in Non-Performing Assets (NPA), and the government could provide capital support in this sector, she claims. Gita Gopinath said, “The banking system is going to see more NPA's. There could be a reason for capital support from the government. The government has to scale up infrastructure spending. And alongside, there has to be a credible path for investments”. Gita Gopinath similarly warned that it will be relatively adverse for India to extend policy support amid coronavirus pandemic and rather stressed on decreasing ‘wasteful expenditure’ in Budget 2021.
Earlier, the Finance Minister of India Nirmala Sitharaman tabled the Economic Survey 2010-21. And this new budget occurred as the Modi government's third budget of the second term. Gita Gopinath suggested the government should carry on cash support to poor people in this financial year as well. During the 9th CD Deshmukh Lecture she said, “The 11.5% number comes from the fact that you are coming off what we estimated as an 8% collapse the previous year. So, a lot of it is pretty mechanical”. Gita Gopinath moreover explained the Centre should concentrate on broadening employment assurance scheme MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) and similarly utilize additional on infrastructural proposals. She speculates that a lot of aspects depend upon how the following months will shift, how the vaccination process will move forward, and what is there in the Budget 2021 in terms of providing backing and maintaining the recovery of the economy.
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Reference:
- www.moneycontrol.com
- www.economictimes.com
- www.thehindu.com
- www.business-standard.com