Budget For India At 100
The upcoming Budget has a lot of dynamics surrounding it. The third wave of the Covid-19 sweeping the country, inflation rising to 5.9 per cent in December 2021 with industrial output slipping to a nine-month low in November 2021 and the crucial assembly elections in five states including the politically important state of Uttar Pradesh. By the time the effects of this Budget will reach the common masses, we’ll just be a year away from the 2024 general elections.
As India marks its 75th Independence Day this year, Manish Sabharwal, Vice Chairman, and Co-founder, TeamLease Services says that the upcoming Budget should focus on India in 2047. “After independence, India made a very good turn democratically. We have built the world’s largest democracy on the soil of the world’s most hierarchical society. But we made a very wrong turn economically,” he says.
“Our labour is handicapped without capital and our capital is handicapped without labour. We have been changing that process since 1991. Structural reforms like National Education Policy, civil services reforms, “financialisation”, raising credit to GDP ratio, giving more money to our cities remain an important component of our policymaking,” he adds.
In the past few years, the transformation has been in line with the agenda that India had 10 years ago which included formalisation, urbanisation, industrialisation and building human capital. Sabharwal says the upcoming Budget will continue to take forward this agenda.
Unemployment is a topic of debate among the youth in the country and especially during elections. India’s jobless rate has stayed between 4 and 9 per cent since independence. Sabharwal states it is time to shift our focus from jobs to wages. “Fundamentally, 42 per cent of our labour force in agriculture is producing only 14 per cent of our GDP. That is one birth defect in the Indian labour market. The other defect is that 50 per cent of our labour force is self-employed; they are not just self-employed, they are self-exploiting,” says Sabharwal.
He suggests that India’s manufacturing has to go from 11 to 18-19 per cent, the ambitious ‘Make in India’ has to become ‘Make for India’ and the target should be fast-growing segments like sales, customer services and logistics. At the same time, he believes the NEP with its thrust on vocationalisation will break down the barriers between education, jobs and employability.
Another concern has been the recapitalisation of banks. In the last three years, India has pumped Rs 2.5 lakh crore of new capital into its nationalised banks and yet their risk-rated assets are lower than what they were three years ago. “We need to fix governance in nationalised banks because regulation cannot substitute for supervision and governance. The focus should be on issuing more licences, fixing governance, and encouraging non-banks,” states Sabharwal.
However, he cautions that the government doesn’t have much fiscal room as India entered the Covid-19 pandemic with a 70 per cent public debt to GDP ratio and will exit with a 92 per cent public debt to GDP ratio. He says that the government should focus on where the money is being spent and should do a suitable reallocation of its resources while giving attention to the means of financing.
