A Budget for Sustained and Inclusive Growth

26 Jan 2022

The Union Budget is being presented at a time when the economy seems to have resumed its upward growth trajectory after the devastation caused by the first and second waves of Covid-19. As per advance estimates, the Indian economy is projected to grow at a rate of 9.2% during FY22 with gross fixed capital formation and exports being the main drivers. And despite the unpredictable behaviour of Omicron and the uncertainty caused by the normalization of monetary policy of advanced countries, there is optimism that economic growth would continue apace. 

Under the circumstances, there are hopes and expectations that the Finance Minister would unravel a reformist budget, which would deploy varied policy levers to buttress the growth momentum currently underway while promoting inclusion. 

A rebound of the investment cycle is the key to strengthening the recovery process. To strengthen investment demand, CII would like to see more public spending on areas such as infrastructure, which has a high multiplier effect on the economy. For this, it is important that the projects delineated under NIP and Gati shakti should be completed on time. 

Secondly, the Government should notify the shelf-ready projects that are in the National Infrastructure Pipeline (NIP), for implementation. There is need to develop a transparent institutional capacity which would help to plan and prepare big-ticket projects so that these are completed on time and the cost overruns are minimized. 

Further, the Government should incentivise private investment in housing, construction, and real estate by taking measures such as extending the interest subvention scheme available on low-cost housing to cover total housing cost of up to Rs 35 lakh instead of Rs 25 lakhs at present. Similarly, the allocation under Pradhan Mantri Awas Yojana (PMAY) should be increased from Rs 27,500 crore allocated in the Union Budget 2021-22.

However, boosting investment demand is not enough. There is need to put more money in the pocket of consumers as private consumption, which comprises 60% of GDP, has not picked up as anticipated, especially in the low- and middle-income strata. The forthcoming Budget should, therefore, support consumption through greater outlay for programmes like the National Rural Employment Guarantee Scheme. The Budget should also find ways to revive income and wages in the rural area.

The pandemic has hugely impacted livelihoods and exacerbated unemployment which in turn has hit purchasing power and consumption demand. Hence, a focus on employment generation is critical. The Government needs to introduce a programme, along the lines of the Production-Linked Incentive (PLI) scheme, to incentivise employment generation directly, which will ultimately boost income levels at the grassroot level and keep up the growth momentum. Such a programme should link incentives to job creation and target employment-intensive sectors like textiles & garments, gems & jewellery, engineering goods, among others. 

Employment-intensive sectors such as tourism should also be incentivized. Further, the Government should speed up the creation of Coastal Economic Zones which would boost manufacturing and create jobs. 

Budget 2022-23 should also adequately provide for augmenting investment in health significantly, to at least 2.5-3% of GDP by 2025 from 1.29% at present, to ensure good quality affordable healthcare to its citizens. This would not only help the Government to tackle the Covid spread effectively but would also boost confidence of people and could ultimately help lift private consumption. The Government should also consider creating a REITS on healthcare which would invest in healthcare infrastructure.

At the same time, investment in quality education and skill development is a pre-requisite for improving productivity and creating jobs. Per capita investment in education has been significantly below international average and this Budget should make a decisive change. 

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