Nirmala Sitharaman faces many challenges regarding Budget 2021. Apart from the economic problem caused by Corona, there is a dispute with China over LAC. In such a situation, the defense budget will also be very important for the government.
Budget 2021 challenges: On February 1, Finance Minister Nirmala Sitharaman will present the most challenging budget. They face many challenges on different front. The biggest challenge is to overcome the slowdown in the economy due to Corona. To accelerate the economy, they will have to emphasize on spending. The problem is that the government’s treasury is empty for spending and tax burden on the public is not possible to fill the treasury. On the other side of the economic challenge, the line of actual control has continued with China for the last six months. China is steadily strengthening itself militarily. In such a situation, the government will have to increase the defense budget to provide better facilities to its army. In this article, we try to understand what is the 5 biggest challenge before Nirmala Sitharaman.
The National Sample Survey report says that there has been a steady decline in rural consumption in the last few years. It started from the financial year 2011-12. However, during this time, there was a rise in urban consumption. The National Account Statistics has also said in its report that the economy of the country had slowed down before Corona. Before the onset of the epidemic, there was a steady decline in consumption. It is believed that in the fiscal year 2020-21, at least minus 8 percent will be recorded in India’s consumption. Due to Corona, there was a huge decline in the income of rural India. The job market is in bad shape. In such a situation, due to the slowdown in the labor market, the possibility of a boom on the consumption front is negative.
Emphasis will be on creating employment opportunities
If the consumption is to be accelerated, then the situation of the labor market will have to improve. If people will get employment, then money will come in their hands and demand will increase with the increase in spending by itself. As we know, there was a steady decline in the country’s growth rate before the onset of the epidemic. However, it is expected to be negative due to corona. According to the NSS report, in 2011-12, salarid contributed 18 per cent to total employment, 30 per cent to casual labor and 52 per cent to self-employed. In the fiscal year 2018-19, the contribution of salaried reached 24 per cent and the contribution of casual labor decreased to 24 per cent. According to the CMIE report, the salaried contribution to the labor market in the financial year 2019-20 had come down to 21 per cent.
There is a steady decline in investment
The contribution of investment in India’s economy is quite significant. It is about 28-30 per cent of India’s GDP. The bad news is that it is at the lowest level in the last 20 years. According to Mint’s report, the contribution of Investment (GFCF) to India’s GDP was about 30 percent in the financial year 2001-02. In FY 2003-04, it came down to around 28 per cent. After that it steadily increased and it reached about 37 percent in 2007-08. It has been steadily declining since the financial year 2011-12 and it had come down to 24 per cent in FY2020. In such a situation, the government will have to take right measures to woo investors. More Read: Good News For Bike Riders: Make big money by putting your bike in Ola! Learn – Its complete process
Investing is also a big challenge
Regarding the steady decline in investment matters, Alok Patania, managing partner of TaxMantra Global, said that there are strict rules about the arrival and departure of funds in India. Investments in India are monitored by all agencies including RBI. Investors always find that regulations are very strict to invest in India and there is a lot of scrutiny even when withdrawing investment. Due to the complicated investment clearance process, MSMEs and start-ups find it difficult to lure investors. The government will have to focus on this problem.
Big challenge to keep rising NPA under control
In the last few years, banks made continuous efforts and there was a steady decline in bad loans. But due to Corona, this problem has become terrible. According to the latest RBI report, by September 2021, the share of bad loans can reach 14% of the total loan. RBI had also talked about Bad Bank in the past on the problem of NPA. It is a big challenge to keep the huge bad loans under control and to continue credit support with balance.
Expenditure increases with inflation control
There are three major pillars of India’s economy. This includes consumption, investment and export. The sad thing is that due to corona all three pillars have become weak. In such a situation, this budget is necessary to entice investors, to give relief to the public to speed up the consumption and to have an export friendly policy to speed up exports. According to sources, to speed up e-commerce exports, the government may approve bulk clearance in this budget. This will accelerate e-commerce merchandise.
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