Govt has decided India’s past Covid crisis by reducing fiscal support in Budget: Yamini Aiyer

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The government seems to have decided that India is beyond the Covid-19 crisis, evident from the planned reduction in expenditure on the rural employment guarantee scheme, said experts during a virtual discussion on the Union Budget 2021-22 on Monday.

“With the push on capital expenditure and infrastructure, it seems like the government has determined for itself that India is entering a post-pandemic phase and the immediate crisis around the pandemic, for which fiscal space needs to be created, (is over),” said Yamini Aiyer, director of the Centre for Policy Research during the event.



The data on unemployment and the evidence of a K-shaped recovery point to a significant amount of stress at the bottom of the pyramid, Aiyer said, adding that the absence of a social safety net will create more stress going forward.

“Housing and safety nets would have been crucial and the absence of this in the budget is really jarring, especially against the backdrop of the migrant crisis,” Aiyer said.

Expenditure on the Mahatma Gandhi National Rural Employment Guarantee Program was reduced to Rs 73,000 crore in the budget for FY22, presented by finance minister Nirmala Sitharaman at the start of the month, against Rs 1.1 lakh crore in the revised estimates for FY21.

Informality

According to Rajat Kathuria, director at Indian Council for Research on International Economic Relations, the expected increase in informality as the economy shifts to more gig-based work made it incumbent upon the government to provide a social safety architecture for informal workers.

“Given that the formal sector is not going to be able to absorb as many workers, while you get the ease of doing business in the top 50 (countries), it’s important to have a path towards trying to bring some social safety net for informal workers,” Kathuria said, speaking as part of the panel.

Protectionism

Addressing India’s increasing protectionism in tariff policy, Kathuria said commercial policy needs to be designed strategically as raising tariffs without making domestic manufacturing competitive would only lead to increased prices.

“Protectionism sits uneasy with our objective of increasing foreign direct investment limits and looking to participate in global markets and value chains, Kathuria said, adding “The design of a strategic industrial policy, just like we did in 1991, in our own interest, should be done again in 2021, in our own interest, not because the rest of the world is doing it.”

Education and skilling

Nishant Chadha, professor at the Indian Development Foundation highlighted the need for an education and skilling policy that focuses on labour productivity, who was also part of the panel.

While labour productivity was in fact growing, Chadha said it was due to a declining base of employment.

“Our manufacturing productivity as a proportion of services was constant until 10 years ago and it has jumped up since then, so manufacturing is becoming more productive,” Chadha said, adding, “But the employment in manufacturing is not growing and our agricultural sector is becoming less productive compared to services over time.”

This left the country in a peculiar situation where it could not move agriculture workers to the manufacturing sector because of declining jobs while they were not skilled enough to shift to the services sector and “this is what our education and skilling policy needs to address,” Chadha said.





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