Tuesday 2 February 2021

Union Budget 2021-22: Privatisation is Main Theme

Nesar Ahmad

We all expected the focus of the union budget 2021-21 was going to be employment and measures to income generation. But MGNREGA, the employment guarantee scheme for the rural India, could not find mention in the Finance Minister’s budget speech.  There is no particular emphasis on employment generation in rural and urban India.

Privatization: The big focus

If anything gets a real push in this budget, it is privatization. The budget made it clear that the government is going to privatize all the Central Public Sector Enterprises (CPSEs) except bare minimum CPSEs in four sectors. Even the state governments will be incentivized to privatize their SPSEs. Not only this, the government also plans to monetize its idle assets including land for which a special purpose vehicle will be created. Most of these lands must have been acquired on meager compensation amount from farmers.

Corona crisis has created shortage of resources which the government wants to cover by disinvestment of PSUs and monetization of the land, beside loans.  Or we can also say that the Corona has become an opportunity for the government to push its privatization agenda.

Infrastructure, not in rural areas!

The second item which got priority in the budget is infrastructure; mainly the mega road and highway projects have been announced in the states which are going to have state elections this very year. But as far as agriculture and rural infrastructure is concerned, the budget for agriculture ministry has been slashed; even the budget for the PM-Kisaan, the direct cash transfer scheme for the farmers has also been reduced compared to current financial year. There is a nominal increase in the  budget for rural development ministry. Budget for MGNREGA and Aajiveeka (self-employment promotion scheme) has increased compared to this year’s budget estimates but MGNREGA budget for 2021-22 has actually declined compared to this year’s revised estimates. Other schemes promoting rural infrastructure like Pradhan Mantri Krishi Sinchayi yojana (irrigation), Pradham Mantri Awas Yojana (housing), PM Gram Sadak Yojana (rural roads) have not got increased allocations in 2021-22.

Health Budget increased: really!

Finance Minister in her budget speech claimed to have increased the health budget by hopping 137%, which sounded really good. But the a closer look suggests that for the first time the water and sanitation budget has been added into the health sector budget to make it look really big. The budget for the health and family welfare department has increased by just Rs. 9000 crores from 62 thousands crores to Rs. 71 thousands crores. In addition to this Rs. 35 thousands crores have been provided for the Covid-19 vaccines. The FM, however, has added Rs. 60 thousands crores for the water and sanitation, beside the the small budget for nutrition, budget for health research in the health sector budget. The Finance Commissions grants for health and family welfare and water and sanitation have also been added to make the health budget look a hopping Rs. 2.23 lakh crores. Budget for NHM increased by just Rs. 3000 crores and there is no budget item mentioned in the detailed budget for the much hyped PM Atmnirbhar Swasth Bharat Yojana for which FM said in her budget speech to have provided Rs. 64,180 crores for six years.

No focus on other social sectors: Budget for education ministry saw a decline of Rs. 4000 crores. In Major schemes National Education Mission (SSA)’s budget slashed by Rs. 5000 crores. Budget for National Social Security Scheme, Swachh Bharat Yojana, Rurban Mission, Rashtriya Gram Swaraj Yojana, Rashtriya Swasthya Bima Yojana, Integrated Child Development Scheme (ICDS), MDM, either got slashed or remained same as the current year. If anyone scheme got real boost in the budget it is Jal Jivan Mission which is a rural drinking water scheme.  Good thing is also that there is no effort to reduce the food subsidy expenditure in the budget. Considering that the PDS has really saved millions from starving during the Covid lockdown, there is a need to further strengthen the public food distribution system. 

Budget for the schemes for the weaker sections – dalits and tribals – have also not increased much. There is also a decline in the budget for ministry of minority welfare.

Gender budget: If we look at the budget from the gender lens, the share of gender budget in the total budget is just 4.45%, 0.3% less than the current year. It was slightly more than 5% in the year 2017-18. What is important here is that the gender budget ratio has been hovering around 5% point since the year it started and there does not seem to be any conscious efforts to increase it. Budget for women and child development ministry has also declined by more than Rs. 5000 corers so have the budgets for the schemes of the ministry like PMMVY and ICDS.

Chart: Share of gender budget in Union  Budget 

Disappointed Middle Class: This budget has also disappointed the great Indian middle classes by not changing the slabs of income tax and levying cess on the petrol and diesel, which the FM said will not affect the prices much. There is also a huge cut in petroleum subsidy which may affect the LPG prices.

Increased deficit:

This year there is going to be a huge fiscal deficit of Rs. 18.48 lakhs crore which will be 9.5% of the GDP. It has been projected to come down to 6.8% of the GDP by end of the year 2021-22. The rise is deficit is a result of declining revenue receipt and increasing expenditure thanks to Corona.  The government has said that next year (2021-22) there is going to be increase in expenditure which will boost the economy. There is increase in the expenditure budget for the year 2021-22 but most of the increase in revenue expenditure will go towards the debt servicing (interest payment).

The major increase in expenditure will be in form of capital expenditure and major part of it will be on reads and highways in the election bound states. The government is hoping that boost to the infrastructure will promote the economy and create employment. The road construction, however, is mechanized and one will have to wait to see how much it helps in employment growth. For employment growth many were also expecting that government will perhaps announce an urban employment guarantee programme but it did not happen. 

1 comment:

  1. Very good piece Dr Nesar. Difficult to comprehend the vision of the ruling regime. Is the government fool enough to rely only on the private sectors to bring end to poverty and deprivation. In the absence of tangible investment in the social sector and agriculture how do we see the light in the end of tunnel? Sad to read the manipulation of the budget number by government in the health sector.