India’s prime 5 economists inform Information18.com that the earlier Union Budget introduced on February 1 is probably not enough to deal with the COVID-19 upheaval.
- Last Updated: April 9, 2020, 10:49 AM IST
India’s present financial state of affairs is nothing prefer it was when finance minister Nirmala Sitharaman introduced the Union Budget on February 1, 2020. The sector-specific allocations and the monetary outlook is much from the current actuality.
Just over two months in the past, the financial system was not observing an unprecedented recession, the unemployment price was not at an all-time excessive, labour participation was not crumbling and industries throughout sectors weren’t making ready, or relatively yielding, to very large losses.
Some of India’s prime economists say it will likely be vital for the Centre to provide you with a second price range after the coronavirus disaster settles giving technique to an financial storm.
India’s first chief statistician Pronab Sen welcomed the thought.
“What is very likely to happen is that the priorities of the budget are most likely to change. And it will have to be reflected somewhere rather than waiting for next year. So you treat the February 1 budget essentially as an interim budget and then go ahead and have another one later,” he stated.
Asked which sectors he thinks ought to be given precedence, Sen stated, “I wouldn’t want to do it in a sector-specific manner. The nature of the problem is fairly generic. One should concentrate the sectoral damage in the banking sector and have a massive package for the banking sector. The government at the moment certainly does not have the bandwidth to figure out how to reach large chunks of the system that are damaged. Better to let the banks do that.”
Sen, who has served because the purposeful and technical head of the nation’s nationwide statistical system, in addition to Secretary, Ministry of Statistics & Programme Implementation, recognised the necessity to get the roles market again on monitor and for that scaling up demand is the one resolution, he stated.
“Everything is ultimately going to depend on how quickly the demand side picks up. Because what would happen by then is 2-3 months of income would have been lost. People would have by then completely drawn their savings particularly in the lower income category. Therefore, rebuilding core demand should be the focus,” he added.
Ritu Dewan, vice-president of the Indian Society of Labour Economics and former president of the Indian Association for Women’s Studies, agreed on the necessity for a revised price range and laid out the attainable choices to be explored.
“The second budget needs to be done in consultation with all political parties, stakeholders and NGOs. Even before coronavirus hit India, the demand side was a problem. The government needs to put people first. They need to take into account that it is the people of India who have suffered because of the pandemic. It has to take into account consumption, employment, health as the most important areas. If you want to keep the supply chain running, you have to announce in the budget that supply of raw materials will be free,” she stated.
Ritu, who was the first-ever lady director of the Department of Economics in University of Mumbai, added, “In order to get consumption back into the cycle, the government has to provide wages to all informal sector workers. Universal basic income is an option. There are so many camps that have been set up. They can easily be turned into production units. There is need for so many masks and gloves that can be home produced. These camps can be used to produce them and in turn can earn wages. It will take care of demand and consumption issues.”
Abhijit Sen, former member of the Planning Commission of India and at the moment professor at Jawaharlal Nehru University, thought of September “a great time” for a second price range.
“I think it will be a good idea because there is no way that you can rely on the assumptions which went into the budget. So you can stick with those numbers, but they have no substance. The budget exercise will also depend on whether or not the government needs to go to Parliament to get supplementary grants. Now, if the supplementary grants change the nature of the budget completely, then it is worth having a new budget otherwise you can go through supplementary grants route,” he added.
“The role of Parliament is essentially to approve expenditure. So they would have to come to Parliament because expenditure would have gone way above planned for in the budget. And numbers on the revenue side would fall hugely short. It should probably be left till things have settled down. Somewhere near September would be a good time,” stated Sen who was awarded the Padma Bhushan for his work in public affairs in 2010.
DK Srivastava, chief coverage adviser at EY India, additionally agreed that India wants a second price range however solely when full normalcy returns.
“I think both on the expenditure side and the revenue side, there are going to be major changes. On the tax revenue side, performance has been significantly lower than the revised estimate for the financial year. So the base for the next financial year need to be changed. The growth and buoyancy assumption for the financial year also needs to be changed. Similarly, for expenditure side, priorities have completely changed and therefore a new strategy for allocation needs to be in place. Most importantly, fiscal deficit needs to be revised. Savings across sectors has gone down,” he stated.
R Nagaraj, professor of economics at Indira Gandhi Institute of Development Research, additionally agreed with the proposition. He stated that the small print of the price range might be labored out based mostly on the scenario that prevails then.
Senior Congress chief Jairam Ramesh in an interview final week had additionally stated that the federal government will now should fully rework the price range numbers to cope with the aftermath of the lockdown.