Coming to terms with an urgency to support the lives and livelihoods badly hit by COVID-19, the Union Budget 2022-23 is an opportunity to streamline the much-needed policy measures. While looking ahead, it is important to look back. It is vital to recall that right before the global pandemic made an unprecedented contraction that was regarded by the Reserve Bank of India (RBI) as “historic technical recession”, the world’s major economies including India were not in a phase of a comfortable economic growth. Subsequently, a trend of shrinking consumption and investment entered into a downward spiral with the global pandemic halting the normal business operations and letting lives and livelihoods suffer unimaginable losses.
COVID-19 and unprecedented crisis
According to the International Monetary Fund (IMF), the world economy contracted by 3.2 percent in 2020 and was projected to expand by 6 percent in 2021. The world economy expanded by 2.8 percent in 2019. No one should find these figures encouraging and assuring for a healthy growth trend. Even more alarming is sensing their imminent fallout and such phenomenon can’t be summed up in data and analysis alone. In the 21st century, as one of the world’s most significant economies, India too can’t choose to be isolated and going backwards on the path of protectionism. In fact, it should continue its interface with the world and reap the benefits of convergence. That too, even at the greater scale. Notwithstanding such practical compulsion and efforts, India deserves to get a calibrated domestic economy with the capacity to generate sufficient employment in formal sectors and help in burgeoning middle-class population to give the economy traction of support in terms of sustained demand.
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As a priority in the short run, the industrial revival should be seen as indispensable for India. Equally important is creating a robust ecosystem for output and demand. As Victor Hugo said, “Nothing is more powerful than an idea whose time has come.” In 1991, the then Finance Minister of India (later prime minister for two terms between 2004 and 2014), Manmohan Singh, quoted it before making history by presenting the grand plan for economic reforms in India. Beyond the words too, the spirit of economic reforms steer India’s growth momentums. In the quest of finding a balanced development paradigm, this is an idea whose time has indeed come.
Economic rebounding process
The believers of “India Growth Story” have all the reasons to keep high expectations from the Union Budget 2022-23. The finance minister is expected to come with the provisions for economic revival, as the third wave of COVID-19 has gripped the country and added to the gloom of previous two waves that caused unimaginable losses of lives and livelihoods. Precisely, the Union Budget 2022-23 should essentially focus on demand generation, job creation, public healthcare, hand-holding Micro, Small and Medium Enterprises (MSMEs) and enabling the economy to regain the lost thrust of ideally double-digit growth. As the shock-absorbing exercise, it would be not wrong to recognise the centrality of increased consumption and production capacity for now as the major driver of the economic rebounding process.
The fiscal interventions have been playing a historically important role in the crisis situation, India successfully braved the subprime crisis-led global economic recession of 2007-09 with fiscal prudence and well-judged monetary policies. As the Covid-19 has severely impacted the economy in the second consecutive year, it is time for solid actions for maximising the revenue while keeping public expenditure as rational as possible.
In search of meeting the revenue target, the public sector assets should not be considered only for sale if these have the potential left for revival. On the tax front, the revenue collections of recent quarters have been encouraging. However, the glaring deficit would need deep strategic manoeuvring for revenue generation. The individual taxpayers especially in lower slabs should get some relief as they have lived an uncertain existence with the Covid-19 changing the way the world functioned earlier.
As the growth propellers, investments should be leveraged with offering reliefs to the key sectors including Housing & Infrastructure, Energy, Agriculture and Food Processing, Pharmaceuticals, Healthcare, Education & Skill Development, Automobile, Tourism, Civil Aviation, Hospitality, Information Technology & Information Technology Enabled Services (IT & ITeS), Banking, Financial Service and Insurance (BFSI), Financing Growth and Sustainability, Manufacturing Competitiveness, Strengthening MSMEs, Supporting Exports, Technology, Research & Development (R&D).
The Ease of Doing Business (EoDB) and compliance should be made smoother as India’s pursuit is to maintain its edge as a prominent global economy and further enhance its global positioning. The impact of economic reforms has been most visible on the primary sector (services) where India emerged as the major power in comparatively a new sector like IT & ITeS. Now it is time the progressive reforms should let the primary (agriculture) and secondary (manufacturing) sectors also avail their true potential. If the Union Budget 2022-23 can present a few grand plans on this front, it will have far-reaching positive effects.
The Goods and Services Tax (GST) collections have been signalling well for the economy, over Rs 1 trillion every month since July 2021 reflected on the increased economic activities besides the improved tax collections.
The crisis and global response
A scenario where an acute public health crisis and systemic failure are defining the existence of humankind beyond borders, it essentially imagines a post-pandemic world with a realistic view about the damages made and how to go ahead on a path less travelled. To brave the new world, a global consensus, otherwise elusive, is needed for revitalising the United Nations (UN), international financial institutions such as the World Bank and regional development banks like Asian Development Bank (ADB). The UN’s role is still critically important in creating a common platform for finding a broad-based approach to strategise the economic rebounding process globally and re-establish the norms of international economic engagements and development partnerships.
As per a press release of the World Bank, “In response to Covid-19 severely damaging the lives and livelihoods of millions of people in developing countries, the World Bank Group deployed over $157 billion to fight the pandemic’s health, economic, and social impacts over the last 15 months (1 April 2020 to 30 June 2021). This was the largest crisis response of any such period in the Bank Group’s history and represents an increase of more than 60 percent over the 15-month period prior to the pandemic. Bank Group commitments and mobilisations in fiscal year 2021 (FY21) alone (1 July 2020 to 30 June 2021) amounted to almost $110 billion (or $84 billion excluding mobilisation, short-term financing, and recipient-executed trust funds).”
This is somewhat reassuring. Such responses are the need of the hour — and not the international development agencies and financial institutions but also the better-off countries with development partnership budgets should re-prioritise the spending plans for making the world better.
After its late institutional response to the crisis, the UN is making course-correction with the socio-economic response and recovery plan for the middle and lower-income countries. As per the UN’s own estimate, while a significant proportion of the UN’s existing $17.8 billion portfolio of sustainable development programmes is being repurposed towards Covid-19 needs, additional funds are required.
Noticeably, the UN COVID-19 Response and Recovery Fund supports the rapid implementation at the country level of the UN Sustainable Development Goals (UNSDG) framework for the immediate socio-economic response to Covid-19. While the action through communication and socio-economic responses have been praiseworthy, the UN surely couldn’t act in the same manner on finding the cause of Covid-19 and its unusual global spread through its General Council or Extraordinary Meeting.
Supporting lives and livelihoods
The COVID-19 pandemic is usually termed a ‘one in a hundred years’ crisis that has globally impacted lives and livelihoods in an unprecedented manner. As the crisis has global nature, India is severely impacted as well. While the world is self-assured to see a sort of re-set, it is the time for the government and industry to reckon the urgency of figuring out their immediate priorities, including on supporting the MSMEs and Exports, the backbones of the economy. A change in approach is much needed at this point in time, before the fundamentals of the world order go into reset mode, there should be the determination to revive the MSMEs and Export Ecosystems to support the much-needed demand factor of the economy. This is the time for proactive collective action to come out of the trying time with a blueprint for the revival of the economy.
The changing world necessitates creating a firmer ground for defeating poverty and inequality — and making sustainability the steering force of business and our social action. Welfarism is not an obsolete concept, this should be recognised. While imagining a post-pandemic world and coping with some of the glaring transitory challenges, an overt inclination is much needed for adopting the inclusive and sustainable development framework. We have to come through this together.
A forward-looking Budget
The Union Budget 2022-23 will be defining for India in emerging from the crisis and reassuring its stake to sustainable growth. A balancing act with recognising the growth impetus and inclusiveness would do immensely well for the Indian economy in short, medium and even long run. While the fundamentals are still strong and supportive, the right policy measures will decide how India comes out from a crisis in the post-pandemic world.
India is waiting for a forward-looking Budget. The policymakers should reciprocate in full spirit. This is the need of the hour.
The author is a policy professional, columnist and writer with a special focus on South Asia. Views expressed are personal.
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