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Union Finance Minister Nirmala Sitaraman is currently facing the toughest challenge of her life. Amidst estimates of nearly eight per cent contraction of the economy, she will be presenting the budget next month. Her hands are full with difficult tasks including bringing back the economy on the growth path, restoring the confidence of the investors, increasing investment in infrastructure and defining the roadmap to make India a $5 trillion economy by 2025. At the same time in accordance with the welfare nature of the government, the Union Finance Minister will have to allocate sufficient funds to health, education, research and development sectors. Moreover, she will have to encourage the growth of employment-generating sectors in-order to continue the momentum of the economy.
Before the pandemic broke out, Indian economy had attained an average growth rate of nearly eight per cent. In the list of emerging economies of the world, India was among the top three nations. It was expected that with reforms like Goods and Services Tax (GST), the economy would grow faster. But the dream run of Indian economy came to an abrupt halt due to the pandemic. In the first quarter of the ongoing fiscal, the economy shrunk nearly 25 per cent, shattering all hopes of becoming one of the world’s biggest economies. At that stage, many economists had ruled out the revival of Indian economy in the near future. But the Indian economy has managed to stage a comeback with the help of its inherent resilience power. Though it is yet to register a positive growth, during the second and third quarters the economy has managed to prevent the negative impact on the economy due to Covid-19 considerably.
The turnaround is so encouraging that many are now expecting a V shape recovery of the Indian economy, which means that the worst is over and from now onwards the economy will continue to only grow. Now the challenge is to speed up the growth. But it is easier said than done. Covid-19 has devastated the world economy. International trade, tourism, etc. are among the worst hit sectors. Both developed and developing countries are now struggling to survive. So with external aids not forthcoming, India will have to raise internal resources to combat the recession-like situation worldwide. To achieve the goal, the Union Finance Minister has already assured that the country will spend a handsome amount to create world-class infrastructure facilities.
Sceptics may continue questioning the availability of funds in a shrinking economy required to develop infrastructure and to continue with various development and welfare projects. But the fact remains that rising GST collection, customs and excise duties, revenue from spectrum auction and disinvestments will ensure that India’s fight to bring the economy back on the rails will not face any financial crunch. Thus the next budget is going to be of utmost significance, perhaps the most important since the path breaking budget presented by the then Union Finance Minister Dr. Manmohan Singh in 1991.