NEW DELHI: Finance Ministry mandarins working on the coming year’s budget want to spend big on infrastructure, healthcare, defence, and incentives for industry. This year’s expenditure budget is consequently likely to be at least 15 per cent larger than last year’s and the largest spending budget till date. Finance Minister Nirmala Sitharaman has already said that “100 years of India wouldn’t have seen a budget being made post-pandemic like this” and her officials have consequently drawn up one which could help spur growth, to try and deliver the economy out of the woods in a hurry.
However, demands for a host of tax sops from corporates and the salaried class, who have suffered immensely due to the ongoing pandemic, as well as demands for increased food and fertiliser subsidies come at a time when there are doubts on government’s ability to raise enough tax. With the economy expected to be recovering after recording a contraction of at least 7 per cent this fiscal, borrowing is likely to be pushed up to record levels next year.
Capital expenditure is likely to be a record Rs 5.5-6 lakh crore while the outlay for Productivity-linked incentives for sectors such as electronics, pharmaceuticals, automobiles, solar, and textiles is likely to be around Rs 50,000 crore. These spendings are seen as growth drivers. Officials were earlier working on estimates which called for pruning down subsidies, considered to be extraordinarily high at a budgeted Rs 2.28 lakh crore for the current fiscal.
But with the ongoing farmer agitation proving to be a political headache, officials said they are unlikely to be slashed by much. The demands for tax sops are also being looked at with far more sympathy than in general, given the suffering caused by the pandemic. “Like every year, chambers and associations have come up with a host of demands for tax sops.
But this time round, the difference is that most of them are valid demands—some for specific sectors which have been badly hit by the, some more generic... like setting off of losses etc.. For the salaried too, there are demands for sops as they have been hit hard by pay cuts, job losses,” pointed out an official.
The problem is that with tax collections likely to remain muted after this year’s GDP contraction, the Government’s ability to hand out tax sop bonanzas will be severely curtailed. “All budgets are tightrope acts, this year may be more so,” an official said.