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Budget 2021: The Growth Recipe

How the FM can make it a 'never before' Budget. Top experts weigh in
Team BT | Print Edition: January 24, 2021
Budget 2021: The Growth Recipe
Illustration by Nilanjan Das

Finance minister Nirmala Sitharaman will present Budget 2021 in the backdrop of an exceptionally chaotic 2020. In Q1 of FY21, India's lockdown-struck gross domestic product (GDP) contracted an unprecedented 23.9 per cent, the worst among major economies. When the economy opened up, pent-up demand pushed up consumption, but GDP still shrank 7.5 per cent in Q2. And even though the RBI predicts that the economic shrinkage is over and GDP will grow 0.1 per cent and 0.7 per cent in third and fourth quarters, respectively, FY21 is destined to go down in history as India's fifth recession.

It is in this backdrop of extreme stress that Sitharaman sought growth inducing ideas with the promise to deliver "a Budget like never before". Under the circumstances, that's a herculean task. After all, the elbow room to spend is constrained by falling tax revenue and rising fiscal deficit, which touched 135.1 per cent of Budget estimate in November. So, what is it that she can do to unleash the potential of India's economy? To suggest a growth recipe, Business Today hosted a Pre-Budget Roundtable comprising D.K. Joshi, Chief Economist, CRISIL; Gopal Krishna Agarwal, National Spokesperson of the BJP on Economic Affairs; Prof. Gourav Vallabh, Spokesperson, Indian National Congress; Mukesh Butani, Managing Partner, BMR Legal Advocates; Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company; and Akhil Gupta, Vice-Chairman, Bharti Enterprises. The discussion was moderated by Rajeev Dubey, Editor, Business Today. Edited excerpts:

Business Today (BT): Where is the Indian economy now? Do you see any improvement in economic situation? Where do we go from here?

D.K. Joshi: The economy has performed better than expected. Second quarter GDP is proof of that. We have seen many upgrades of growth forecast, including by RBI. Our own forecast now is -7.7 per cent contraction as against -9 per cent earlier with the fourth quarter registering a mild positive growth. Second, people are learning to live with the virus. That has helped the economy with positive pent-up demand. The most positive news is that the Covid curve has been under control for some time now.

But recovery is not uniform across sectors. Smaller firms have been hit much more than the larger ones. So, next round of banking NPAs could arise from smaller firms. The pick-up is led by manufacturing, although services are also trying to claw back. But as long as there is fear of the virus, demand services will continue to suffer from residual anxieties.

The rural economy is doing better than urban. Clearly, agriculture has not been impacted. Government support has had a rural bias. There is no scheme like MGNREGA, which has been expanded by Rs 50,000 crore, for the urban poor. Finally, we are unhappy with higher inflation, but high food inflation particularly WPI food inflation which is a close proxy for what farmers get is benefiting them.

Nilesh Shah: Todays period is like 1991. We have gone through an unprecedented crisis and seen the worst-ever quarterly GDP contraction. But it is an unprecedented opportunity.

If you go by RBIs estimates, more than two crore Indians spend $10-15 billion annually on foreign travel. Because of Covid restrictions, few will travel abroad this year. If they spend on domestic tourism and other things, our economy will benefit. Similarly, every year, over 2,00,000 students spend $7 billion to study abroad. That number will fall significantly this year. Can we retain those students in our universities?

In the last 21 years, Indians have spent $373 billion in net gold imports. We have spent more money abroad than we have received as foreign direct investment and foreign portfolio investment. Covid-19 has pulled down gold imports and smuggling. That money is going to remain in India. We can utilise that for investment.

We have a $60 billion trade deficit with China. There are APIs we have to import, but when Ganesh murtis start coming from China, it is a question mark on our policies. Due to Covid-19, trade deficit with China will come down to $30-35 billion. Can we ensure that this remains contained?

You have seen a German company shifting its entire manufacturing from China to Andhra. Samsung is shifting its mobile handset manufacturing to India. It is also trying to shift its entire high definition colour TV plant from China to India. We have to convert this into a torrent.

If we convert this crisis into an opportunity, like in 1991, and ensure people consume products made in India, and also become part of global supply chain, it will lead to better growth.

Gopal Krishna Agarwal: Agriculture has been showing good growth for two quarters. It has grown despite fall in GDP. This is where the Centre has been focusing. The FM recently said the Budget will be growth oriented. Focus on infrastructure spending will continue. Disinvestment plans are on track and GST resource generation has improved. IIP has shown healthy recovery.

The global economy is confident about India. We are seeing higher inflows into capital markets. Our forex reserves are at a good level.

The government is focusing on manufacturing. It is negotiating on bilateral trade. There was confusion about Atmanirbhar Bharat closing the economy but that has been clarified by the government.

The government is working on four policies to boost manufacturing. These are industrial policy, new logistics policy, e-commerce/retail trade policy and foreign trade policy. These will give our firms a level-playing field to be globally competitive.

Interest rates have come down substantially. Liquidity is being pushed so that companies don't face resource crunch.

Labour reforms have been announced and will be notified soon. We have also seen agriculture reforms. The government is committed to private investment in agriculture marketing and opening up mandis. These will bring investments in agriculture. The focus is on agriculture, manufacturing, creating a level-playing field, improving factors of production and helping through government spending.

Despite inflation risks, the government has said it will not get bogged down by fiscal constraints. Inflation has to be tackled more from supply side and less by curbing demand.

The vaccine is on the cards. The FM said we have the capacity to make and distribute vaccines. Health infrastructure is poor, and this is where the government has focused in the Budget.

Gourav Vallabh: GDP figures for last 10 quarters are 7.1 per cent, 6.2 per cent, 5.6 per cent, 5.7 per cent, 5.2 per cent, 4.4 per cent, 4.1 per cent, 3.1 per cent, -23.9 per cent and -7.5 per cent. Without new investments, can any economy revive? The answer is no.

Investment comes from households and private and public sectors. In October 2020, 6.6 per cent households hoped for better income, which fell to 5.2 per cent in November. So, 95 per cent households feel they will face greater resource constraint next month. They will not invest in this scenario. During the UPA rule, this was around 50 per cent. Household and private investments account for 75 per cent of gross fixed capital formation. When credit is not growing, how will private investment pick up? Household investment is not picking up as there is no hope for household earners.

During the pandemic, government data for the first half of the fiscal shows only 40 per cent of capex got invested. This is reflected in unemployment numbers. In November, 35 lakh people lost jobs, as per CMIE data. In October, it was 6 lakh. Job market is not picking up, investment is not picking up. How can we say there is a recovery? Without investment, the economy cannot revive. This is for the organised sector. The unorganised sector has a bigger problem.

Last, demand is not picking up. Our manufacturing sector is at less than 70 per cent capacity utilisation and the government is doing supply-side interventions.

In the immediate term, the government has to give money to people who have lost jobs. In the moderate term, it has to raise resources by way of Covid bonds.

Mukesh Butani: We need to give context when we say there is economic recovery. Even as an optimist, when the government announced the first quarter deceleration of 23 per cent, one would not have imagined that this is where we would be just before we announce Q3 figures.

Professor Vallabh pointed out we had sufficient economic shocks even without the pandemic. If Covid had not happened in FY21, we would have done well with 5 per cent GDP growth. Unfortunately, that is not the situation now. If we end this year with negative growth rate of 5-7 per cent, which seems likely - and for all we know we may be in for positive surprise - I think we would do well. The test would be how the economy pans out next year.

Growth in manufacturing and agriculture has come at the right time. If there is an 8-9 per cent revival next fiscal on a lower base, we would have done well. As the economy recovers post-Covid, what would be critical would be policy directions, especially in the healthcare sector, which we all know has tremendous potential.

Government spending is critical. Often, when policy makers see fiscal deficit going out of control, they see expenditure cut as the easiest way out. We shouldnt forget that when the economy was jiggling at 5-6 per cent and dropped below 5 per cent for two quarters, the government was still the more material spender. Government spending will play a role. Private sector confidence will return once we come out of the Covid crisis. It will take a while, two to three quarters. Its a mixed bag and I remain positive. I see the glass half full and look forward to this being a directional Budget.

BT: What are the three-four things the government should do to spur growth?

Butani: I want to mention three things, FTA, domestic trade policy and manufacturing.

The reason for widening trade deficit is underutilisation of existing FTA benefits. The government needs to review existing FTAs. India should actively boost bilateral and trilateral trade. The two trade agreements that can emerge as substitute for RCEP are the Japan-Australia trilateral supply chain resilience initiative and the early harvest scheme put in place with Thailand. Third is FTAs with Mauritius, the US and Russia. We should also accelerate the EU agreement.

The 2018 Baba Kalyani report on SEZs has some excellent recommendations. It's good to see it back on the table.

There are several recommendations before DGFT. Merchandise exports after Covid-19 are a focus area. Exports to China, South Korea, Vietnam and Indonesia are showing positive trends. In services, Service Export From India Scheme (SEIS) should cover business services, communication and construction.

We need to resume stalled mine projects, which have huge employment potential. This will boost energy consumption, jobs, rail transportation.

Joshi: In the short term, government has to spend more. And given limited fiscal space, it has to do more with less. Demand support in the short run has to depend on the government and for that it needs to open its purse strings. You cant be tightfisted about spending like you were in the first half. Next is creating demand by spending on infrastructure. The implementation of the massive infrastructure scheme that the government has announced should start quickly. The Budget is an appropriate juncture for that.

Reforms pay off with a lag. We had reforms in 1991, but growth touched 8 per cent in the 2000 decade. For lifting the growth potential, efficiency enhancing reforms should continue and not be a single event.

Shah: Our exports are not competitive due to power and logistics costs. In India, power for agriculture is free and transmission and distribution losses are high. Manufacturers pay more for power because of this unfair burden sharing. Can the Budget take away the extra burden? Globally, most cargo moves on water, followed by the railways and road. Environmentally, too, road is more polluting. But our railway freight bears the burden of passenger subsidy {and is uncompetitive}.

The second thing the Budget should do relates to the PLI Scheme. We need to learn from mistakes in the Textiles Upgradation Fund (TUF) Scheme. Honest entrepreneurs took far less loans from TUF while crooks borrowed more. Easy TUF financing is the source of some large NPAs in textiles.

The final thing is freeing entrepreneurship. We have come a long way in Ease of Doing Business. But private investment is still on the back foot. The most important thing is rule of law. We have over four million cheque-bounce cases in courts. We need to create a fast-track mechanism to resolve commercial disputes.

China is five-and-a-half times bigger than us. Its credit creation is four-and-a-half times bigger. Its debt to GDP ratio is four-and-a-half times higher. How can it create such huge credit? Its velocity of money is high as disputes are settled much faster than in India.

Vallabh: We need strategies for increasing public, private and household investments. We have to give confidence to household investors. That can be done by direct monetary support. The focus should be on job creation. If not, we have to select sectors where job creation opportunities are highest. We have to strike a balance between demand and supply. There is a problem in supply side also as industry is working at less than 70 per cent capacity. In agriculture, farmers have to get the right price for their produce.

Agarwal: The Budget has to focus on infrastructure spending. If that is hampered, the whole demand thing, ease of living, ease of doing business, will be hampered. Second is opening defence for MSME manufacturing. MSMEs need to be supported through cluster development or assured buying. The Budget will have to focus on middle class and urban sector. On trade agreements, instead of multilaterals, bilateral trade agreements are the way forward, as suggested by Butani and Joshi.

On agriculture, we have to clarify if we should give price cost reduction support or price support. We have to move slowly but work more towards cost reduction instead of price support. Butani said we are planning a logistic policy. Foreign trade and industrial policies are also on the cards. The last point is that the government has to be pro-business.

BT: We know the state of government finances. But public expenditure engine has to start working. Realistically, what can one expect from the Budget?

Akhil Gupta: The pandemic has affected government finances just like it has affected private sector finances. This is more so because of the stimulus packages. However, for rejuvenating the economy, it is imperative that public expenditure on infrastructure projects starts. Realistically, one can expect a fair allocation towards such projects, though it will be unrealistic to expect a very large allocation in the Budget towards it due to resource constraints.

Joshi: The pandemic has blurred the distinction between Budget and spending outside the Budget. You need an unprecedented stimulus. The Budget is no more viewed as only a statement of accounts but also a policy stance. There are three things it needs to do. It has to act as a bridge between crisis and recovery. You have to protect vulnerable businesses and individuals. The second is to support the economy when things start improving by providing demand support. The third is to improve the growth potential, which means reforms. If you look at data for the current fiscal, government consumption expenditure came down in Q2. Government consumption spending in H1 was 4 per cent less than in same period last year. Capital spending fell. This was expected. The government had to take measures to do more with less.

Coming to the Budget, it was said that manufacturing is the focus. But in the short term, the services sector has been hit much more than manufacturing. Support for services should be part of the Budget. For manufacturing, you need a broad stimulus to push demand for consumer goods, etc.

The rural economy has been well supported. But urban will need support. We need ways to increase jobs. Finally, the focus of the Budget should be on public investment revival.

Vallabh: The Budget will focus on spending for infrastructure and industrial capex. Government spending is not picking up. In the first six months, 40 per cent of capex was spent. They did not spend despite the pandemic, which is a big question mark.

We need an urban MGNREGA. During the pandemic, there have been many middle income job losses and salary cuts. According to IMF, US stimulus accounted for 11 per cent of its GDP, while ours was just 1.5 per cent. Last, the government needs a resource mobilisation plan. I am more concerned over how much government is spending from January-March rather than post-March. We require money in hands of people. Many western countries are raising money by Covid bonds. Why not us? When there is contraction in eight core sectors in the second quarter, is the supply side geared? The answer is no. We are having problems on the supply side, but we have to address the demand problem too. We have to generate demand, we have to use our spare capacity, generate employment.

Butani: I want to focus on two aspects - manufacturing and healthcare. In manufacturing, the biggest question is addressing the perception that the government is adopting protectionism and import substitution to promote local manufacturing. The government is targeting exports of $1 trillion by 2025 on $5 trillion GDP. What role will manufacturing play in that? Manufacturing gross value-added declined from 18.4 per cent in 2010/11 to 15 per cent in 2020. Nilesh pointed out India's high import dependence on China in APIs. Some sectors need a closer look. But what is the plan for import substitution? Identifying sectors where there is large import dependence is important. The government rightly looked at electronics, defence, chemicals and allied products, including pharmaceutical and agricultural products. The profit-linked incentive started for electronics and medical devices. I am glad Covid made us expand the PLI Scheme to drugs & pharmaceuticals, automobiles, solar modules, white goods and air-conditioners. The next step would be quality consciousness to become more export competitive.

Let me come to sectors where we can expect massive expenditure. The focus is on vaccination, but it will go beyond that. Our health outlay will quadruple over a two-year period. Will that cover universal insurance, doctors' upskilling and research activities?

Many aspects of the present incentive scheme deserve a re-look. How many new hospitals are given tax holidays? How many new hospitals are given the option of faster amortisation? Healthcare can be ensured by preventive health check-ups; increasing tax exemption for medical expenses; looking at remote telemedicine as an opportunity.

Nilesh: I want the government (in the Budget) to act as referee rather than a player. India became an IT superpower as entrepreneurs were encouraged and government acted as a regulator. The same spirit is needed in the Budget. We have inflation but low capacity use; low private investment but high FDI; economic data is showing contraction but equity market is full of hope for the future. In such a situation, we need to unleash Indian entrepreneurship.

Agarwal: The government has elbow room to act on those suggestions. So, there is neither big hope nor big despair. Our understanding is that the current situation is bad and we are moving in the right direction. There is scope for the government to do a lot of things.

In India, everybody expects the government to do this and that but we should talk more about what industry should do. If the government has to implement things, it needs a good narrative, which is what we are lacking. If it is embarking on reforms, there is no supportive narrative and (people with) vested interests jump (into opposition).

The government is working on new reforms. After 1991, reforms in agriculture and labour were missing. The government has embarked on those. But support from public, economists and opposition is missing.

When the government embarks on labour reforms, there will be more agitations. When there is consensus on an issue, why is there no support from public, industrialists, opposition and economists? Why is there a socialistic mindset? What is the harm in the government being pro-business? Business creates resources. Without resources, you can only talk about distribution. How will you distribute unless you generate resources through businesses?

Our expectations are from public and industry too. They ask for fiscal stimulus, policy measures. Why are they (industries) not focusing on improving factors of production? Why do they seek protection and import substitution?

Smaller businesses are complaining that raw materials have become uncompetitive. The government needs to do some balancing. Disinvestment is another area where the government is focusing. On borrowing, the finance secretary has clarified plans to list sovereign bonds on global indices. The government has done a lot for the poor and for industry by providing liquidity. But middle class is feeling the pinch. It needs support. We will go all out on reforms. We will also sign trade agreements.

Joshi: The government came out with a scrappage policy a few years ago, but not much has happened since. This is the time to implement it. It will lead to scrapping of 6,00,000 commercial vehicles over the next two-three years and generate demand. It will give a push to the auto sector and the economy. The housing sector is beginning to pick up because of reduced stamp duty. It is time to enhance income tax deduction limits on home loans.

BT: And where will the resources come from?

Akhil Gupta: While the FM has said that she will place growth before fiscal deficit, I expect that some balancing will be kept in mind. Accordingly, some moderation in outlay for infrastructure projects should be expected. Even with muted public expenditure, fiscal deficit will be large. Since it will be impractical to increase taxes in view of the state of the economy and requirement to push growth, the government will have to resort to more borrowings.

The two obvious areas for the government to spur growth would be investment in infrastructure and stimulus by way of subsidies and direct transfers to economically weaker sections. I feel one area where the government can take active steps to spur growth while containing fiscal deficit is encouraging private sector investment in infrastructure projects by providing sovereign guarantees to lenders till the critical stage of the project is achieved.

Nilesh: There are enough opportunities to raise resources. We can think about a gold amnesty scheme. There is more than $2 trillion worth of gold in India, but most of it is in tijori as black economy. If we structure the scheme appropriately and execute it with military precision, just 10 per cent of gold stock in India will mean about $200 billion in resources. A 25 per cent tax rate means $50 billion in taxes and $150 billion equity capital.

Second, we need to realise better value for our PSUs. In January 2008, the BSE PSU Index was at 11,205 and the Sensex was at 21,000. Today, after 12 years, the Sensex is up 2.25 times to 47,000, but the PSU Index is down 48 per cent to 5,900. All PSUs trade at below book value. PSUs can be re-rated if we adopt strategic disinvestment. If we assume that all PSUs start trading at the higher end of the value they have traded in the past, there's an appreciation of Rs 7 lakh crore. In 2002/03, 45 per cent of Hindustan Zinc was divested for Rs 769 crore. Today, the government's 30 per cent holding is valued at Rs 30,000 crore.

The third way to raise money is to bring underground black economy into formal economy. Indians spend a staggering amount in casinos of Macau, Singapore, Las Vegas and Nepal. We hear about large-scale betting in IPL, during elections. Can we legalise such activities? In 2018, Kerala lottery collected revenues of Rs 12,000 crore and profits of Rs 2,500 crore.

In 1968, India and Pakistan created the Custodian of Enemy Property Act. Pakistan liquidated enemy properties in 1971. India is sitting on real estate that was valued at more than Rs 1 lakh crore in 2016.

In the US, estate duty is 40 per cent. It starts with large exemptions. So, it does not affect average Americans. There are many Indians who pay estate duty on properties that they inherit in India. Can we levy estate duty on unproductive assets like gold, diamonds, pearls and artifacts?

There are many loopholes in our tax system. There is a cottage industry which converts interest income at 43 per cent to long-term capital gains, which are taxed at 10 per cent. This is happening through zero coupon listed debentures of 13 months. Can we not plug these loopholes? Finally, from my own selfish interest, more than Rs 1 lakh crore is stuck in collective investment schemes. These are corner jewellers who run away with your money, NBFCs, chit funds and agro-tech and forest companies which have defaulted. This is happening because buying a financial product is not as simple as buying these products. With bank accounts linked to Aadhaar and PAN, why can't buying financial products be a simple experience?

Butani: Let's look at the Vivad Se Vishwas Scheme. It's an excellent scheme but we went into lockdown a few weeks after it was announced. Why not extend it till March 31?

On divestment, let's leave out the large PSU lenders where government is not very keen - SBI, Bank of Baroda, Union Bank. Why doesn't the government reduce its stake in other PSBs by 50 per cent?

We should have a more liberal ESOP regime for startups. Also, we must look at extending startup benefits from 7-10 years, apart from faster amortisation of R&D expenditure. I understand political compulsions, but we wrongly see agriculture as one sector. It is divided into production, marketing and allied activities. There is nothing that stops the government from taxing marketing and allied activities. As the farm bill is rolled out, marketing will become institutionalised. There is also an opportunity for the government to demonetise land. Finally, on strategic investment, let's look at state PSUs too.

BT: Its a sensitive issue, but states do levy tax on agriculture...

Butani: It's a perception. Today, hardly any land revenue is collected. It is politically convenient for state-level politicians not to upset the applecart but there are many activities within agriculture which you can tax even within our current constitutional framework.

Joshi: The immediate focus could be on divestment and asset monetisation for raising non-tax revenues. In the short-term there are constraints to raising revenues via taxation, so higher borrowings may be the fall back for filling the gap in resources.

Also ease of business and regulation on ground should be improved to de-risk infrastructure to attract foreign capital to address the resource crunch there.

Vallabh: We need immediate, medium and long-term resource generation. What is the objective of divestment? Such decisions should be more open-minded, and rather than selling loss-making PSUs, one has to find out a better rationale to sell based on a transparent policy. I think the government is not clear about which enterprises it wants to divest. Sometimes, they say we are going to divest in banking, then they say they have selected 23 companies. We need a proper strategy.

Second is rate rationalisation. Do all of us feel motorbikes should be at 28 per cent GST? Are motorbikes luxury? There is historical evidence that countries that have done rate rationalisation effectively have increased revenues.

Third is, whenever we talk about resource generation, we have seen a contradiction in the last six years. The Make in India is a good scheme. But who all started their business under Make in India? The majority were Chinese companies. On the one hand, through Make in India, we are opening doors for foreign entities, now suddenly, we have Vocal For Local. It gives contradictory signals to the market. If all countries start following this, are we not closing the doors for Indian manufacturers who wish to manufacture abroad?

Agarwal: There are two-three important points. One is monetisation of assets. Second is issuance of bonds. In the last Budget, the government announced mega schemes on global listing of domestic bonds. The scheme did not take off because of the pandemic. This is the second area that will be in focus. On disinvestment, look at state PSUs too. We should not look at disinvestment of only loss-making PSUs because ultimately it is the demand from capital markets which will decide which scrips you can sell. You can get good valuation for companies which are performing well. Everybody agrees that PSUs are a drain on government resources.

BT: What is the major change from the last Budget? Do you see a hike in import duties? What could government do to ensure raw material prices do not rise obscenely?

Agarwal: A lot of industries have approached us on raw materials. So, there will be some thinking on how to balance this strategy.

BT: Vallabh talked about household investment and savings. While it is not directly related to the Budget, in the last few months, inflation has risen and real rate of returns are negative. What will be policy going forward?

Vallabh: Its more a fiscal measure than a matter for RBI. The reason household investment has been consistently falling is that the government is not transferring money in hands of people, directly or indirectly. The reason it tries to give is that some sovereign rating agency may rate them with lower marks. When a patient is on ventilator, and his oxygen saturation level is 70 or less, are you going to treat the allergy on his face or improve the saturation level? I am interested in seeing government intervention pre-Budget rather than post-March 2021. Supporting manufacturers, especially MSMEs, is the need of the hour. Post Covid, thousands of manufacturers have shut down and thousands have taken a hit, which has impacted the supply side permanently. Long-term strategy for such issues is the key.

BT: What can we realistically expect on taxation? We know we will fall short on collections this year.

Agarwal: Import substitution tariff policy has lived its useful life. That cannot be an objective now. Protectionism is more of industry demand. On direct tax, I would like the government focus on compliance, technology and online mechanism. At present, there is no justification for increasing taxes.

BT: The government has been coming out with stimulus measures. What has been the most visible impact?

Joshi: Covid-19 started off as a health crisis. Because we don't have medicine, the only prophylactic available was containment, which is social distancing and shutdown. That created a supply side crisis with manufacturing contracting by almost 40 per cent in the first quarter and then moving up by 0.6 per cent once containment was removed. As you move along, it is becoming a demand-side shock, because incomes have been impaired. The fiscal response evolved. In the first part, Atma Nirbhar Bharat 1, the focus was on providing foodgrain to migrants, Rs 50,000 crore more was pumped into MGNREGA, and PM KISAN was pushed. This rural tilt of policy support helped the rural economy. Initially, it was helping people not able to participate in economic activity. Gradually, fiscal support started going towards areas which needed to be slowly boosted. Now, the stage has come where you have to focus more on demand. What you do in January-March quarter is critical as pent-up demand is going to vanish by then. And vulnerable people and sectors will continue require support. The direction of support so far has been right but the quantum is clearly insufficient given the massive hit to the economy.

The nature of support will gradually need to shift in quantum and in direction from supply side to demand side.

Vallabh: Atma Nirbhar Bharat is about 2 per cent of GDP. That's what IMF is saying. Rs 4 lakh crore is the real value of the package whereas countries with similar or less health issues than us are spending 10-12 per cent of GDP. I was expecting 5-6 per cent of GDP, Rs 10-12 lakh crore. The first fiscal stimulus package was totally dedicated towards supply side issues. Someone told me you were asking 5-6 per cent of GDP, and we have given 10 per cent. The real impact is only Rs 4 lakh crore. Had it been Rs 10 lakh crore, things would have been better.

Agarwal: The first fiscal stimulus brought wonderful results. Pushing funds into rural economy revived agriculture. Second, the government has used this as an opportunity for long-pending big-ticket reforms - logistics, industrial, agriculture and labour. Atma Nirbhar Bharat is not an end. It will continue.

BT: An RBI group recently suggested allowing corporates into banking. Will your party support this?

Vallabh: Whenever there is a financial issue, the government suggests merger of public sector banks. The merger of two anaemic patients will lead to a new anaemic patient. Without capital support, what is the merger going to solve? Now, they are talking about entry of business houses in banking. What is government policy on banking? You promised to provide capital in the Indradhanush Scheme, some Rs 2.5 lakh crore, to public sector banks. Have you done that?

What is evident is that Rs 6.6 lakh crore corporate exposure of public sector banks has been written off from their books. Nobody is against genuine corporates having interest in banking. When you say large corporates, every Indian is aware which those two large corporates are. We are against that. The investor should have exposure and experience in that sector. Bank after bank is collapsing. Problem is something else and you are entering into a new debate. The answer in one word: No.

BT: What top three reforms would you like to see in this Budget which will have long-term impact on the economy?

Shah: We have covered a long distance but need to empower our entrepreneurs. Logistics and power costs need to be sorted out. Most of our regulations happen with the lowest common denominator in mind because crooks somehow get away with our over-burdened judicial system. That is why the honest guy has to carry the compliance burden.

We have to continue the good work of empowering entrepreneurs through ease of doing business. We have to improve ease of doing investment too. Like Jan Dhan bank account, why not create a Jan Nivesh campaign. How do we bring unproductive capital into the formal economy?

Joshi: I broadly agree with Nilesh. Right now, the trend is towards de-globalisation. This reduces opportunities for India to push exports. But there is also a movement away from China. If India wants to take advantage of this realignment, it has to focus on what Nilesh was talking about - reforms aimed at domestic capability enhancement which will allow you to compete with other emerging markets. Tweaking tariffs and trade agreements is fine but improving domestic capability is more important. We are a labour surplus country but capital-intensive products are dominant even in exports. Here, labour laws become critical, so that is the next leg of reforms. To reap the opportunity, we need to move beyond headline improvement of Ease of Doing Business to ground-level improvement.

Butani: In most reforms, the focus is on what the central government is doing and less on what states are doing. Land and labour, the two stumbling blocks for an entrepreneur, are state subjects. What Uttar Pradesh government has been doing in the Covid period to promote manufacturing and the kind of investment it attracted is impressive.

To attract investment, we need to make a statement. As a lawyer, on arbitration law, the message that we are sending is farcical. Every 15 days, the Supreme Court talks about arbitration being an avenue. We should we be asking, why is that not happening? The moment we give a message that there is an important ecosystem where disputes can be settled outside courts, you will see a different messaging. Our overall index of doing business may have improved, but if you look at IMF reports on execution of contracts, arbitration, some of the tax compliances, we still do not perform very well.

Vallabh: We need to continue the reform process and ensure policies do not contradict each other. We require investment from all sectors, and those that create jobs should be our focus. In agriculture, farmers should get the right price for their produce. Post-Covid strategic planning needs to be different. The charter for the next 5-10 years should start from instilling confidence and providing a conducive environment for investment, consumption and streamlining political and economic policies.

Agarwal: Subsidy rationalisation is the need of the hour. Budget is the place for doing this. Agriculture and power are two areas where the government can work. The government should go all out for reforms. Agriculture, labour and land are the three areas where reforms should happen. Municipal bonds is one area where resource generation can happen.

BT: What is the fiscal deficit target we should be comfortable with?

Joshi: There are so many moving parts that it is difficult to pin point at a certain number. It actually depends on the economic context and you do with the money. Its crisis time so government needs to work with higher deficits as is happening across the world. If you are borrowing for productive purposes, it will always pay off. So deficit is contextual and FRBM target needs to be pushed ahead for some more time.

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