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Decoding the budget and the economics of welfare -Yamini Aiyar

-Hindustan Times

Several announcements — a bad bank, the proposal for a development financial institution, and bank recapitalisation — aim at reforming the economy. But these will not respond to the structural inequalities caused by the pandemic

Covid-19 is a crisis like no other. And, expectedly, it has wreaked havoc on the Government of India (GoI)’s financial arithmetic as it struggled to deal with collapsing tax revenues and increased expenditure pressures. Therefore, there are two questions that need to be asked of the FY 2021 budget.

How did the Union government reorient its macro-fiscal position to counteract the economic fallout of the pandemic and what does this reveal about the nature of the policy choices made by the government to respond to the Covid-19-induced economic crisis? Second, what does the budget offer as a policy pathway to nurture the economy back to health in FY 2021-22?

In FY 21, the lockdown-induced freeze on the economy expectedly resulted in a collapse in revenues while expenditure pressures increased. Revenue receipts collapsed from 20.2 lakh crore to 15.5 lakh crore, expenditure increased from 30.4 lakh crore to 34.5 lakh crore, as did the one number that the government has thus far worried about the most — the fiscal deficit.

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