Budget 2021 Should Focus Primarily On Growth, Says Industry Body CII

2021-01-12 07:46:52

Budget 2021 Should Focus Primarily On Stimulating Growth, Says Industry Body CII

The Finance Minister Nirmala Sitharaman is scheduled to present the Budget on February 1.

The 2021 Budget proposals should focus primarily on stimulating growth, even if it means that fiscal consolidation is postponed for another year, industry body CII said in its pre-Budget memorandum. The Finance Minister Nirmala Sitharaman is scheduled to present the Budget for financial year 2021-22 on February 1.

The Budget comes at a time when the pandemic has altered the entire economic situation and caused unprecedented economic disruption. The GDP has contracted by 15.7 per cent in April-September 2020, the worst in recent history.

In light of the current economic scenario, the industry body recommends that the government expenditure be increased in moderation and targeted towards high multiplier areas, as this will lead to additional borrowing paying for itself through higher growth over the medium term.

The fiscal situation has been hit by a major shortfall in revenue collection, amid the Covid-19 crisis. Recent estimates suggest that the Centre’s fiscal deficit could widen to 7-8 per cent of GDP in 2020-21, nearly two-and-a-half times the budgetary target of 3.5 per cent.

The government should therefore, according to CII, announce a credible and realistic fiscal deficit target for FY22. It should adopt a flexible, rangebound deficit target instead of a fixed number. A higher deficit, albeit within reasonable limits, would result in faster growth and smaller deficits in the future.


It is also advisable for the government to lay down a clear roadmap for return to the path of fiscal consolidation in the future. The government should focus on the quality of fiscal spending, invest in productive areas such as physical and social infrastructure and target projects that can be implemented quickly and yield positive returns, the industry body emphasized.

Massive investments in infrastructure, both in urban and rural areas, are needed to facilitate an economic rebound. The government needs to explore revenue generating options such as divestment and rationalizing unnecessary expenditure. It should formulate a clear roadmap on divestment and act on its intention to disinvest in non-strategic sectors.

The government should exit loss-making enterprises, such as Scooters India, Air India, HMT, Cement Corporation of India and British India Corporation and implement disinvestment of LIC at the earliest. Putting assets such as ports and airports up for strategic sale, either through stock markets or transparent auctions, could also garner much-needed monetary resources to fund infrastructural growth. The government could also monetize the surplus land assets of railways and defence, and increase foreign borrowing in order to garner additional funds to boost growth, CII concludes.

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