To put it briefly, the year is closing just as it began with the economy being pulled up by its bootstraps, even as new virus mutations (then Delta variant, now Omicron) circle like vultures overhead. If in initial months, it seemed as though the deepest horrors of the pandemic were behind us, we were soon gripped by a ferocious second wave of Covid-19 infections that left an untold trail of human tragedy, exposing the government’s recklessness and the country’s inadequate healthcare infrastructure.
Notwithstanding the shortcomings, the govenment used the crisis to go headlong with its welfare-versus-reforms approach for development. As opposed to opening up the treasury, the government favoured reforms and 2021 saw some watershed moments in areas such as public procurement, besides making meaningful amendments to the Insolvency and Bankruptcy Code (IBC), Limited Liability Partnership (LLP) Act 2008, and taxation laws.
Perhaps, one of the biggest achievements includes repealing of the retrospective tax ending years of legal disputes with multinationals like Cairn and Vodafone at international tribunals. Similarly, the changes made to the LLP Act decriminalised various offences, lowered compliances. Tweaks in IBC aids in faster resolution saving time and effort. Then there’s this production linked incentive scheme rolled out to boost 14 sectors, That said, a lack of political consensus on agriculture reforms amid a year-long farmers’ protest saw the government quashing its own policies in a final showdown.
While Air India’s privatisation is the undisputed lodestar of our disinvestment strategy, the deal is less buck and more whiz-bang. The pipeline of state assets such as BPCL, insurance companies and banks within this fiscal is long and with just one quarter to go, there’s little hope of meeting the annual target. The ballyhooed public listing of LIC India too gained attention. The government also started unlocking infrastructure assets through its monetisation programme, of which an esstimated 15-17% accrued revenue will likely fund the Rs 111 lakh crore National Infrastructure Pipeline (NIP) plan.
On the fiscal front, better than expected tax collections have put a lock on the sum of all fiscal fears.
2021 marked 30 years of deregulation of the Indian economy and as Finance Minister Niramal Sitharaman noted earlier, India needs transformational, not incremental changes. While our macros are looking good, inflation is cause of worry. Apart from the belated fuel tax cuts, there’s enough room for further reductions, besides of course, supply-side interventions, which the government must think through.