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Despite some hits, the Budget has crucial misses -R Nagaraj

-The Hindu

That there is no targeted employment programme to alleviate the immediate crisis is a matter of concern

The Budget, at its simplest, is the government’s tentative income and expenditure statement. Like all financial statements, the devil lies in the fine print. At its broadest, the Budget is a pious statement of the government’s policy and ideological intentions. It is also the government’s statement of how it seeks to tackle the immediate political (electoral) and economic challenges. Hence, any quick assessment of the Budget has to be preliminary. So how is the Budget likely to affect the lives of citizens immediately, and economic aggregates such as investment, output, employment and income distribution in the medium term?

India’s meagre response

Domestic output or GDP, net of inflation, is expected to decline by 7.7% in the current financial year (FY2020-21), compared to the previous year (FY2019-20). The decline in per capita income is by 8.7%. The contraction is one of the worst among the world’s major countries. The novel coronavirus pandemic and the resultant lockdown led to massive job and livelihood losses. Unlike most advanced countries and emerging market economies, India’s response to address the distress of the masses has been meagre. The government’s additional public spending to cope with the unprecedented crisis has been a little over 1% of GDP. As is widely known, the output (GDP) contraction in 2020-21 has come on top of a slowdown in GDP growth over much of the previous decade (the 2010s), fall in employment, the decline in real wages, rise in the number of people in poverty, and, hence, an expected rise in the proportion of undernourished children. Much of the decline in the growth rate is on account of an unprecedented fall in fixed investment rate as a ratio of GDP, especially in infrastructure sectors.

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