All eyes will be on Finance Minister Nirmala Sitharaman on February 1 when she presents the Union Budget 2021 considering the grim legacy of 2020 - on economic, health, and political front. The economic impact of the COVID-19 pandemic has been vastly disruptive starting with the severe first-quarter GDP contraction, though we may end the fiscal year with a reasonable 7.7% contraction, as predicated in the advance estimates released by the National Statistics Office (NSO).
The bounce-back on the back of the first quarter contraction has been a pleasant surprise, setting the tone for what optimists predict to be double digit growth in FY22 on the back of low base.
With the deficit on tax collection targets catching up with the surge in belated tax filings for March 31, 2020, buoyancy in advance tax collections for December 15 third quarter instalments and three consecutive months of GST collection targets crossing well above Rs 1 lakh crore, the silver lining is visible amidst the dark cloud.
FM Sitharaman's statement to present a "budget like never before" has raised expectations to revive the COVID-struck economy at this crucial juncture in its resurrection story. Here are three key expectations in the areas of Healthcare, Foreign Trade Policy and Agriculture sectors.
The COVID-19 pandemic has brought to the fore a need for massive investment in health infrastructure. India, with five hospital beds and 8.6 doctors for every 10,000 people, ranks 155th in Human Development Index. The country's total healthcare spending at 3.6% of GDP, as per OECD, is way lower than other emerging countries.
There can be no two views as regards the deficiency in terms of infrastructure or manpower with optimal patient overload and world class quality of services at affordable rates. It is apparent that the exigencies of the present situation demand a high level of focus on vaccination.
This, however, should not underscore the long-standing requirement for a strong policy direction for a complete overhaul of the present ecosystem. A dedicated plan to incentivise massive investment in facilities, not just in Metropolitan towns, but in the interiors of the country is the need of the hour.
India has adequate medical colleges and supporting manpower required to run the new facilities and hence, it's only a question of channelising the manpower resources with equitable distribution such that healthcare is within the reach of all citizens.
Just as for low-cost housing, tax holiday benefits for new hospitals and related facilities should be offered. Besides, the government needs to forward a strong policy intervention in the area of tele-medicine which will greatly help alleviate the rural and urban mismatch in healthcare.
Free Trade Agreements
The widening trade deficit has been a major cause of concern coupled with the steep fall in exports. There is an urgent need to massively expand the export portfolio and limit imports only to essential and non-substitutable goods, with the latter being driven by the Atmanirbhar programme.
While the regular export incentivising programme helps, there is a need for a dedicated economic partnership, particularly in the service sector, to ensure that Indian talent is put to optimal use and human skills are harnessed with growth in literacy levels. With tactful diplomacy, the government needs to pick up focus on FTAs (Free Trade Agreement) for an incremental increase in bilateral and trilateral trade.
India needs to think of an alternative to the Regional Comprehensive Economic Partnership (RCEP). Its key contenders for trade, investment and comprehensive partnership include the US, UK, EU and Japan. While enough effort has been spent, there should be clear messaging to promote local manufacturing, using tariffs to discourage imports of non-essential goods and a clear mandate to the negotiators to deliver a time bound solution to put in place a framework for propelling international trade.
In a move towards exploring international markets for Indian agricultural produce, the government should explore bilateral partnerships. For instance, under the India - UAE food corridor, numerous steps are being negotiated, like the project to set up eight food processing units in Madhya Pradesh funded by UAE.
It is estimated that the corridor will benefit more than 2 million farmers and create an additional two lakh jobs in the sector. To achieve sustainable development, there is an imminent need to build upon organised and systematic supply chains to ensure a robust network for high quality local produce.
Agricultural expansion will not only increase productivity but shall provide greater income in the hands of farmers. One needs to see the outcome of the farm bills, which now seems to have become a casualty due to the intervention of the Supreme Court.
Further, a specific regional strategy for capitalising potential based on climatic factors, shall provide India a competitive advantage for high quality local produce. Steps should be taken to reduce proximity between farmers and consumers to enable access to greater volume, improve logistical efficiencies and open new markets.
In conclusion, the Budget 2021 should reflect concrete and enthused government efforts to boost both consumption and demand for an overall push to the economy.
[The author is a Partner BMR Legal. He was assisted by Sahil Sharma (Managing Associate). Views are personal.)]