Demand revival essential for economy to take off

This year's Budget is being presented in unusual times. A pandemic has engulfed the globe for the past year and caused untold havoc to the health of millions. In addition, it has created an economic downturn even worse than during the 2008 financial crisis. In this country, the positives right now are that the economy seems to be slowly getting back to normal while the rates of the Covid virus have gone down significantly. Besides, the vaccination drive is expected to cover a sizable amount of the population over the next six months. In this scenario, the Finance Minister Nirmala Sitharaman needs to present a Budget that will revive demand and growth while giving a helping hand to those at the bottom of the pyramid.

The stimulus measures announced last year had a focus largely on the monetary side with credit flows sought to be given a boost. It is now time, however, for a more direct approach to stimulate demand. This should be through direct cash transfers to the accounts of the poor who have been worst affected by the pandemic. It becomes even more imperative in the light of the latest Oxfam report that highlights growing global inequities as a result of the pandemic. The report said the wealth of Indian billionaires increased by 35 per cent during the lockdown. In contrast 12.2 crore people lost jobs, of which 75 per cent were in the informal sector. In this scenario, it is clear that direct benefit transfers are needed immediately to support the most vulnerable group including those who have fallen out of the jobs market.

Another critical area needing more attention is small and medium business. The package unveiled last year for this sector was simply not enough to rescue companies struggling from loss of income and having to cut the workforce to resume even curtailed operations. The economic revival now being witnessed appears to be an impetus largely from bigger corporates. These had the resources to bear the stresses and restrictions due to the lockdown, unlike smaller entities. The services segment especially the hospitality sector including hotels and small restaurants also continues to be badly hit. This sector encompasses millions of small enterprises with a vast number of formal and informal workers. The entire small and medium business segment is estimated to employ 110 million workers but many have either closed down or reduced their work force. A natural consequence is that the CMIE (Centre for Monitoring Indian Economy) data is showing job losses at an all - time high in recent months despite the apparent economic recovery.

The package of measures for this sector announced last year was largely in terms of providing fresh credit to units which had taken loans. Small industry associations complained they continued to face bureaucratic hurdles in availing of the new facility while those in the tiny and micro segment had been left out altogether. The next sector that must be put on high priority is healthcare. The need to ensure better healthcare amenities for all has come to the fore during pandemic. It is now abundantly clear that the health of the economy is linked to the health of the general public.

Meanwhile, the pandemic has exposed the shortfall in the country's healthcare infrastructure. Even in the big metros, it became difficult to find beds during the peak of the crisis. Luckily the Covid virus did not penetrate too far into rural areas as the state of the primary health care system in these areas is abysmal. This is despite the fact that India has a thriving pharmaceuticals industry and is even a major drugs exporter. The lack of infrastructure is largely due to the low spending on health which is only about 1.5 per cent of GDP as against 5 per cent for China and 7 to 8 per cent for European countries. The outlay on health not only has to be stepped up sharply but the focus needs to be on improving basic facilities in small towns and rural areas. And finally, the Budget must pay special attention to education. Here too spending as a percentage of GDP is only around 2.8 per cent. This is another area where many lacunas have been exposed during the pandemic.

The need for online learning has laid bare the fact that most children here do not have digital education facilities. In other words, India may be touted as a software superpower, but the majority of schoolchildren do not have access to mobile phones, televisions or laptops to help them through the learning process. The reliance on mid-day meals as a source of nutrition has also emerged starkly as many states found closing schools was affecting the health of children.

The forthcoming Budget thus needs to make a shift in its development targets. Health and education, in a break from the past, need to be accorded higher priority than ever before instead of being mentioned in passing in the annual financial exercise. Small business also needs to be given its rightful due in the light of its huge role in providing employment to the masses. And finally, it would be in the fitness of things if direct cash transfers are made to the poorest of the poor to compensate them for the hardships of the pandemic. The Finance Minister thus needs to take adopt an innovative approach to the Budget this year as the country is in unprecedented times owing to the bleak shadow of the Covid virus.