Indian Union Budget 2021-22: Economist and the former governor of the Reserve Bank of India (RBI) Dr C Rangarajan who has been watching the economy closely as tries to cope with the financial scars following the pandemic, is delighted that there is a shift in the expenditures in favour of greater capital expenditure. He nevertheless, reminds us that the distinction involving the total expenditure this year and next is pretty marginal. “The revised estimates for total expenditure for 2020-21 amounts to Rs 34.50 lakh crore and the budget estimate for 2021-22 is Rs 34.83 lakh crore. Therefore the difference is very little. But there has been a substantial shift in the composition of the expenditure in favour of capital expenditures and this is a welcome development,” he says.
Speaking to TheSpuzz Online, Dr Rangarajan says what is crucial is that the capital expenditure “has increased from 1.64 per cent of the GDP (Gross Domestic Product) in 2019-20 to 2.25 per cent in 2020-21 and to 2.48 per cent in 2021-22. This shift in the composition of expenditures is welcome and is a reflection of the fact that the government spends more in favour of infrastructure and asset-building.”
Further rise in fiscal deficit probably The other element that desires consideration in the price range is the image on the income side – the raise in the total income receipts. “The centre’s tax revenue for 2021-22 is budgeted to increase by 14.9 per cent. This is against a backdrop of expected increase in nominal GDP by 14.4 per cent. Therefore, the buoyancy is little over 1, which is an acceptable level of buoyancy. But the question is whether the nominal GDP will grow by 14.4 per cent because there are some doubts on that score because the projections on revenue appear to be optimistic and this has implications for the budget deficit and therefore a matter of concern,” he says.
Dr Rangarajan says the announced price range deficit (revised estimate) of 9.5 per cent for 2020-21 although pretty higher is on account of steep fall in income. But feels the projected fiscal deficit (price range estimate) of 6.8 per cent (of the GDP) for 2021-22 is probably to be exceeded. It all boils down to query irrespective of whether the nominal GDP will raise by 14.4 per cent. It all depends on what the genuine GDP development will be and what inflation will be. Dr Rangarajan also points out that the government in its financial survey the earlier day place out that the genuine GDP development for 2021-22 will be 11 per cent, which to him, nonetheless desires to be watched as offered that the economy is nonetheless facing restrictions and vaccinations have nonetheless to be accomplished and the financial activity has nonetheless to collect steam, expectations are the genuine GDP raise could be in the area of 8 to 11 per cent. The movement on the fiscal consolidation strategy till 2025-26 is, he says, all hinged on to what the fiscal deficit will be in 2021-22. Finally, thinking about that the expenditures in the present year and the next are more or much less at the identical level then when some sectors have observed an improved allocation, it by implication also indicates some have taken a hit and that also desires to be kept in thoughts when seeking at the financial recovery.