By Amit Cowshish
Indian Union Budget 2021-22: Addressing the CII Partnership Summit 2020 earlier this month, Finance Minister Nirmala Sitharaman promised a in no way-observed-ahead of sort of price range for the subsequent fiscal 2021-22. This bravado might come to haunt her and the government when she presents the price range on February 1, 2021. For, such is the magnitude of the requirement that it is practically not possible to meet it in any substantial measure.
Even in the standard years, finance ministers discover it challenging to meet the aspirations of a billion-plus citizen and numerous organisations that rely on government assistance. The 1991 price range which ushered in financial reforms and the 1997 price range, dubbed as a dream price range by the media, had been possibly exceptions.
Repeating these exceptional feats, a great deal much less presenting a price range which ‘100 years of India wouldn’t have seen… getting produced post-pandemic like this’, appears a virtual impossibility with the economy obtaining taken the hardest hit ever since of the rampaging Covid-19 pandemic that is now threatening to assume more menacing proportions.
The finance minister did add, almost certainly as an afterthought, that it will not be probable to provide on this guarantee devoid of the industry’s inputs and want list -anything that the business and several interest groups give every single year anyway. Be that as it might, the business and other interest groups can be anticipated to largely seek concessions, monetary assistance, fiscal incentives, and lowering of taxes and duties. Even the frequent individual has comparable expectations.
These expectations are reputable but meeting them needs large sums of dollars which the government can raise only by way of taxation, borrowings, or other assorted approaches like disinvestment. There are social, financial, and political limits on how far any government can go in resorting to these measures. One issue is, as a result, clear: the ball is squarely in the finance minister’s court.
In her address to the CII, she produced a pointed reference to infrastructure, medicine and biotechnology as sectors that need investment, apart from vocational education and talent improvement. But these are not the only sectors desperate for budgetary assistance. There are numerous other folks, such as defence which, on typical, accounts for 15-16% of the total central government expenditure and is almost certainly the second single biggest chunk of expenditure in the union price range, subsequent only to interest payment.
Finance ministers routinely guarantee in their price range speech that there will be no dearth of funds for defence, but the reality is very distinct. The gap amongst the requirement projected by the armed forces and the actual budgetary allocation has gone up from Rs 23,014.43 crore in 2010-11 to Rs 1,03,535 crore in 2020-21, of which Rs 59,416.63 crore was beneath the capital segment.
Those projections and allocations had been produced when the safety circumstance was standard as compared with the circumstance that created following the presentation of the final price range, following an unprecedented violent clash with the Peoples’ Liberation Army in Ladakh’s Galwan valley. The ongoing stand-off has led to emergency purchases worth an indeterminable quantity, apart from all the routine procurement for which enough allocation was anyway not produced when the price range was presented final February.
Additional sums of dollars might be essential this year itself to spend for a element of the emergency purchases whose delivery is anticipated throughout the existing fiscal. But the consequent liability added to the liability on account of previous contracts and the organisational modifications that are getting contemplated alongside, such as the raising of theatre commands, will need unascertainable augmentation of budgetary allocation for the existing and coming years.
The defence pensions price range, which has been increasing swiftly, going up from Rs 25,000 crore in 2010-11 to Rs 1,33,825 crore this fiscal, will also have to be factored in by the finance minister when she finalises the allocation for defence, specifically if it is decided to implement the second upgradation of pensions that was due a couple of years back beneath the one particular-rank-one particular-pension scheme.
It is pointless speculating about the extent of raise in the defence price range, but it would be protected to say -devoid of the danger of getting proved incorrect- that the allocation is unlikely to meet the expectations of the armed forces and the defence analysts, who have for lengthy been asking for defence price range to be pegged at 3% of the gross domestic solution.
The finance minister has yet another guarantee to maintain. In May this year, she had announced a separate price range for domestic capital procurement. It remains unclear irrespective of whether she intended to produce a separate moiety in the price range for domestic procurement. If that is what was intended, presentation of the subsequent year’s price range would be an proper chance to provide on the guarantee.
The fifteenth finance commission was asked by the union cabinet to address the issues concerning the allocation of sufficient funds and creation of a non-lapsable fund for defence and internal safety. The commission has submitted its suggestions which might provide some manoeuvring space to the finance minister, but it is a feeble hope.
Raising sufficiently larger income and allocating affordable sums of dollars to several competing sectors, such as defence, which is a perennial zero-sum game, would need exceptional talent in tight-rope walking. The finance minister will have to pull a rabbit out of the hat to realize this feat and present a in no way-observed-ahead of sort of price range that she has promised.
(The author is a former Financial Advisor (Acquisition), Ministry of Defence. Views are individual.)