Budget 2021-22

 Budget 2021-22 has received widespread welcome. The habitual naysayers have mostly been unable to pick holes in the budget. This is surprising since the budget is a political document that has no guarantee  against criticism. 

There are two reasons why the Finance Minister has escaped criticism this time. COVID-19 has conditioned us to be prepared for a higher than usual Fiscal Deficit. In fact, the general feeling is that the government should have spent more and that the FD must be more. The second reason is everyone was expecting a COVID Cess to improve government's finances. The absence of an expected negative constitutes a positive. Thus, though a budget traditionally attracts many justified and unjustified criticisms, Budget 2021-22 has a teflon quality that ensures that no criticism sticks to it.

However, some persons always go overboard in either direction. Shankar Sharma, co-founder, First Global exclaims that this budget is equivalent to Kapil Dev's 4 sixes in the Lord's test. P.Chidambaram bemoans that "this is a letdown like never before." Both must be aware that what they say is nowhere near the truth.

There are some ominous portents. External debt was raised in the current year for Rs. 54,522 crore against the Budget Estimate Rs.4,622 crore. India's economic strength has always been the fact that our borrowings are mainly domestic. Foreign borrowings are exposed to currency risk which might upset our plans.

Revenue Deficit for 2021-22 is budgeted at 5.1% of GDP. This is uncomfortably high. Revenue Deficit crudely means that we are borrowing to pay revenue expenditure like salaries and pensions. If we borrow money to meet revenue expenditure, how do we generate funds to meet repayment liability? We will have to borrow more to repay the present borrowings. A typical Ponzi scheme!