By Aruna Sharma
Budget 2021 comes at a difficult time for the Indian economy. The immediate target is economic recovery after several quarters of poor growth and a contraction in the first two quarters of the current financial year. The economic survey expects the Indian economy to contract 7.7% in the current financial year to bounce back with a 11% growth in the next. The unprecedented double-digit growth has more to do with the low base effect than a turbo-charged performance of the economy. Through Budget 2021, finance minister Nirmala Sitharaman is looking to achieve sustainable 7-8% of GDP growth and to generate 8.1 million sustainable jobs every year.
The budget has broken the shackles of the FRBM Act with a 6.8% fiscal deficit that will be bridged with borrowings and asset monetisation. A big challenge, considering the dismal past experience in meeting the asset monetisation targets.
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Budget 2021: Leaning on technology for growth
While listening to the Budget 2021 speech, it became strikingly clear that the government and the finance minister are leaning on the digital economy to trigger economic growth and employment generation. The key is the 4Cs — consistency, credibility, conducive policies and convergence of agencies and schemes with similar objectives.
Budget 2021 has made a provision of Rs 1,500 crore to offset the reduction in fees chargeable for the merchant discount rates (MDR) for UPI and RuPay. This will boost e-commerce. The frequent changes in e-Commerce policy have been debated. The key for MSMEs to enter the export market is e-commerce that will offer them new markets and opportunities with feedback to improve products.
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Employment focus of Budget 2021
The MSME sector is a big employment generator. The budget announcement of priority to Logistics and Warehousing sector to bring down logistics cost will bring in employment in manufacturing, FinTech, logistic management and warehousing to the youth in spread out geographical areas thus enabling local sustainable quality employment.
There is an interesting attempt in Budget 2021 is to establish a SEBI-regulated gold exchange that will create new opportunities for FinTech and usher in transparency in market rates. The gems and jewelry industry is large source of jobs and exports. The digital interventions will offer better business and opportunities for start-ups.
One country one code to eliminate overlapping regulations like SEBI Act, Depositors Act, Securities Contract (Regulations) Act and Securities Act will pave way for easy compliance and will reduce defaults and the resultant harassment. Foreign investors may feel more comfortable to invest.
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Digital thrust to generate reliable data
The intention of Budget 2021 to make census 2021 a digital one will offer huge economic benefits by developing a common household database that will ensure that no one is left behind in schemes for skilling, credit and employment. If the plan is meticulously implemented, it could help inclusive growth. It can also help avoid frequent surveys for different needs and enable real time analytics for entitlements.
The different existing databases can be replaced by new data when the four labour codes will come into effect this year, Social security to gig and platform workers for the first time globally, minimum wages and coverage under ESIC for all workers, and allowing women to work in night shifts with adequate safety measures are some measures with potential to achieve inclusive growth in the informal sector. The real GDP calculations that were impossible all these years can be realty soon.
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Another benefit of going digital is NCLT continuing its e-courts. The setting up of development financial institutions (DFIs) to create a lending portfolio of Rs 5 lakh crore supplemented by debt financing of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trust (REITs) will lead to quick resolution of stressed assets and make them productive.
The effective use of digital technology depends on connectivity and penetration of internet. The use of technology can make the ambitious Budget 2021 work to support local economy, triggering exports and employment growth.
(Aruna Sharma is a New-Delhi based economist and policy analyst. She is a former secretary, government of India. Views are personal.)