India Fiscal Budget Synopsis 2021
Tuesday Feb 2, 2021

Our Finance Minister started her speech – “this budget has been made during unprecedented circumstances”. She was referring to the pandemic and the mayhem it created. However, this budget is not merely unprecedented on that count. We have been having a difficult economic run for a few years now. Foreign Direct Investment (‘FDI’) has been generally lower than expectation, and given the growing nationalistic views around the globe, we may continue to see this trend. The aggressive geo-political situation is also pushing up our defense spending, besides the rather hefty health bill that the government has to now foot. The MSME sector is under stress given the fallout of prior years that was then exacerbated by the pandemic – their credit lines are squeezed, and expansion plans are conservative. In effect, the overall tax collection is low and plans to divest assets were put aside given concerns of muted business valuations. Expectedly, the Government resorted to borrowings. This is likely to result in a higher fiscal deficit of 9.5 per cent for fiscal year ending 2021 and projection for next year is at 6.8 per cent – on either count too high and it will have bearing on inflation. Shall we say, “The perfect storm”!

Our FM has set aside our fiscal concerns and the pandemic is also waning. Time to get back to work with fervor – to rebuild and recoup.

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