Budget 2021 – A pragmatic budget in a difficult year

GST collections for the full year had fallen drastically even as direct tax collections had also faltered. In the midst of all this revenue related chaos, the Indian economy was expected to contract at -7.7%. In short, the conflict in the economic situation was obvious.

 

On the one hand, the budget had to be reformist to drive growth higher. At the same time, the budget also had to be conservative in order to avoid revenue leakage and any negative marks from the credit rating agencies. In the face of such conflicting priorities, it must be said that the budget has done a commendable job. It has been a bold budget that has not really minced words at any stage. At the same time, the budget has been pragmatic too.

 

The strategy of the budget was straight forward. A hike in customs duty was an obvious answer to generate revenues in the short term and also to benefit Make in India. An aggressive disinvestment plan was very much needed. Fiscal deficit will stay high for some time but a very smart move to not bother on that. The top priority to health and monetization of road, highway and gas pipeline assets is a welcome move. Tax rates were not changed but certainly simplified.

 

In short, the budget has done the best under the present trying circumstances to balance growth and circumspection.