Boost for Economy

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THE budget presented by finance minister Nirmala Sitharaman sent the stock market soaring with sensex scaling over 2300 points. The total size of the 2021-22 budget was at Rs 34.83 lakh crore. Around 5.54 lakh crore was provided for capital expenditure. Sitharaman announced a slew of taxation reforms. A large allocation has been made for healthcare. This included a total spend of around Rs 2 lakh crore on healthcare with Rs 35,000 crore on Covid-19 vaccine development and inoculation. This is an increase of 137 percent compared to the outlay on healthcare which was Rs 94,452 crore in 2020. The finance minister also announced a new cess on agriculture development – Rs 2.5 per litre on petrol and Rs 4 per litre on diesel. Also, four poll-bound states – Kerala, Tamil Nadu, Assam and West Bengal – will see significant spending on highway road expansion.

Significantly, the budget also has a new vehicle scrapping policy that aims to provide the auto sector a boost. There will now be a vehicle fitness test after 20 years in case of personal vehicles and 15 years in case of commercial vehicles. The auto sector has been in a slump over the last three years. In fact, 2019 had witnessed the biggest decline in auto sales. Overall, the focus has been on healthcare and infrastructure. The budget provided Rs 1.18 lakh crore for ministry of Roads and Rs 1.10 lakh crore for Railways.

The budget was Nirmala Sitharaman’s third and also India’s first paperless budget. She used a ‘made in India’ tablet to deliver the budget address. In the budget, the finance minister has chosen to spend her way out of the current financial crisis. And this is what the economy needed in the given circumstances. The budget is thus a step in the direction towards a self-reliant economy also called Atmanirbharta. This is expected to drive economic momentum and growth.

But given the battering the economy has received due to the ongoing pandemic, it will be a long time before things return to normal. As per estimates released by Ministry of Statistics and Programme Implementation last year, India’s Gross Domestic Product for the April-June quarter slipped by a whopping 23.9 per cent, owing to a strict nationwide lockdown due to the novel coronavirus. In 2019, the GDP had expanded by 5.2 per cent in the comparable quarter. The gaping dent in the GDP has meant that the lakhs of jobs have been lost which will not be created in near future. For that to happen, the economy will have to kickstart and start functioning normally. And this, in turn, will not be possible on a sustainable basis until the vaccination is done on a mass scale and the government gets a grip on the runaway pandemic. This would mean probably a wait of three to six more months. But a budget that has focussed on health care and infrastructure development will certainly go a long way to give economy the necessary boost it needed.

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