In its annual budget unveiled on Monday, India showed that it is ready to spend big to dig up its economy, which has fallen out of the COVID-19-inspired hole.
In its annual budget unveiled on Monday, India showed that it is willing to spend big time to get out of the Covey-19-inspired hole to dig up its economy, even if it means more to do. Ranking more loans.
Finance Minister Nirmala Sitharaman announced that the government was increasing spending on healthcare, infrastructure and agriculture, while the cap for foreign investment in the country’s vast insurance sector would also be raised from 49 percent to 74 percent. It is likely to attract investment from United States and European insurance companies.
Outlook is larger than expected. Also, unlike previous budgets, the government is not trying to pay for it by raising taxes.
So what was the biggest surprise in India’s budget? And is there any red flag to watch out for?
What’s the big deal in this budget?
Sitharaman pegged the fiscal deficit – it is a reduction in income with spending for a fixed period – to 9.5 percent of the size of the economy for the current financial year. This is far higher than the 7.25 percent predicted by a group of economists surveyed by Bloomberg News and higher than the 3.5 percent that was estimated at the beginning of the year – or the 3 percent required by law.
The government’s willingness to bear a wider fiscal deficit than in previous years was one of the most unexpected surprises in the budget.
CARE Ratings chief economist Madan Sabnavis also admitted that he, along with other economists, did not expect the government to overturn its conservative goals. “We went wrong!” He told Al Jazeera.
Why is the Government of India ready to break the bank with this budget?
Because the government is trying to revive an economy that is expected to hit a record 7.7 percent for the year through March.
For the next fiscal year, which starts from 1 April, the government has pegged the deficit at 6.8 per cent and has clearly stated that it aims only to achieve a fiscal deficit of less than 4.5 per cent by 2025-2026. In other words, the government is finally loosening its purse strings and that’s why it can create a budget that “doesn’t make anyone unhappy,” says Care Ratings Sabnavis.
Are there any red flags here?
Maybe one. To pay some investment expenses, the government is banking on its ability to sell some of its assets to raise funds.
It has set a divestment target of 1.75 trillion rupees ($ 23.97bn). Although, it usually misses such goals, if it happens this year, its entire fiscal mathematics may be shut down.
Ruthless. How is it possible that the math will stop?
Hard to say, but a possible airbag exists, at least for now.
With the Indian stock market at an all-time high – the S&P BSE Sensex rose 5 percent to 48,600.61 after a six-session loss in the run-up to the budget – if the government could manage to sell any of its assets So, this is the process. According to Al Jazeera, Sunil Sinha, chief economist at India Ratings, a fitch unit, often does the same, because they need to be sold cheaply.
So where is all that money being spent?
Healthcare is a big winner. Sitharaman has allocated 2.2 trillion rupees ($ 30.20bn) for healthcare in the coming financial year, as well as 350 billion rupees ($ 4.81bn) for COVID-19 vaccines (the government will impose at least two more Indian vaccines, she said Said,) and promised to allocate more funds when needed. Sitharaman also announced a new federal health plan, for which he has spent $ 641 billion ($ 8.80bn) over the next six years.
Another major winner is infrastructure, with 2.87 trillion rupees ($ 39.40bn) allocated for clean water supply over the next five years; 3 trillion rupees ($ 41.10 billion) for the power sector for the next five years; 1.18 trillion rupees ($ 16.17bn) to the Ministry of Roads and Highways and 1.1 trillion rupees ($ 15.07bn) to the Railways.
Agriculture is also a high priority sector, with the government announcing an estimated 1.7 trillion rupees ($ 23.29bn) for paddy procurement, as well as an agricultural credit target of 16.5 trillion Indian rupees ($ 226.9bn) in the coming year. developed.
Is there anything else that has reduced the deficit?
The government too has finally brought on its balance sheet, some of which it has so far kept away from its books and funded through backdoor, such as the money it spends on food subsidies. The “sticker setback” of high fiscal deficit numbers is due to that, Barclays India’s economist Rahul Bazoria told Al Jazeera. He, Like other economists, hails as a step towards greater transparency.