A Revolutionary Budget – but Challenging Times Ahead

Written By: Dhruv C Katoch

Budget 2021-22[i]  presented by Finance Minister Nirmala Sitharaman on 1 February 2021 in Parliament was perhaps the most revolutionary budget presented by any finance minister since the opening up of the economy in 1991. It came in the backdrop of a year long lockdown caused by the COVID-19 pandemic—a result of the SARS-Cov-2 virus which originated and spread from China, and which caused a severe economic meltdown in India and across the world. Fortunately, India has handled the pandemic extremely well, which reflects on the capacity of the government and the people of India to respond to a crisis. Among the major initiatives taken by the government to alleviate the impact of the pandemic and provide succour to the weakest and most vulnerable sections of society were schemes such as the Pradhan Mantri Garib Kalyan Yojana, valued at Rs 2.76 lakh crore, and announced within 48 hours of the three week long complete lockdown of the country being announced on 24 March 2020. This was followed by the rollout of the AtmaNirbhar Bharat package (ANB 1.0) in May 2020, and thereafter the rollout of two more AtmaNirbhar Bharat packages (ANB 2.0 and ANB 3.0), the three packages having a total financial impact of Rs 27.1 lakh crore, which also included measures taken by the Reserve Bank of India.

Towards the end of 2020, there were visible signs of an economic recovery. GST collections for the month of December 2020 crossed Rs 1.15 lakh crore, which was the highest since GST was introduced, surpassing the earlier highest GST collection of Rs 1,13,866 crore for April 2019.[ii] The GST collections for January 2021 stood at Rs 1,19,847 crore[iii], marking the fourth straight month of over Rs 1 lakh crore tax collection, a sign of strong recovery.

The budget has variously been described as a bold and imaginative budget to revive the economy, the sentiment being reflected in the stock market which saw a bullish trend. Much to the relief of the people of India, the budget went beyond expectations by refraining from imposing any new taxes. The reformist agenda of the budget was also apparent in measures such as the intent to go the privatisation path, which was signalled by the proposal to privatise two nationalised banks and one general insurance company, raising the FDI limit on insurance to 74 percent from 49 percent and the proposal to set up an Asset Reconstruction and Management Company, for stressed assets of banks. Clearly, India’s financial sector is headed for much better times.

That the government is set on its reformist agenda is also indicated by its refusal to buckle under the farmers protest. A revival of the economy and a push towards self reliance in key sectors such as defence and cutting edge technologies will however not suit certain countries who perceive India’s rise as being antithetical to their interests. Within the country, vested interests which have benefitted from the statism of the past will also hotly oppose any attempts at reform. The coming years are hence likely to see heightened civil protests, organised by powerful groups, but camouflaged under the veneer of India’s democratic structure and the freedoms which it affords for all shades of dissent.

The toolkit, unintentionally revealed by Greta Thunberg in a tweet she made supporting the farmers agitation in India is a pointer to a wider conspiracy, wherein the social media is used to shape opinions and perceptions. Robyn Rihanna Fenty, a Barbadian singer, actress and businesswoman, also tweeted in support of the agitating farmers in India as did a host of other people who have large fan followings. A tweet per se is harmless and not of special significance. But when a large number of influential people express similar ideas in unison, it creates a ripple effect which has the potential to transform into a wave, when it crosses the tipping point—a theory expounded by Malcolm Gladwell in his book The Tipping Point. In his book, Gladwell explains how many of today’s problems are as volatile as epidemics and can ‘tip’ and change radically at any point. The same goes for information. A tweet can become viral and cause concerns across the world stage.

The farmers agitation which began in 2020 and peaked in January 2021 has striking similarities to the protests which took place in Delhi and some other parts of the country against the Citizenship Amendment Act in 2019 and which peaked in January 2020, timed to the visit of the US President to India. Going back further in time, we see a continuum of such protests, timed and motivated to fan disturbances. The fake narratives of an ‘intolerant India,’ to staging protests against bauxite mining in Odisha, which forced the closure of the Vedanta alumina refinery in the state are examples of how perceptions can be shaped to suit vested interests. It comes as little surprise that the Chinese benefitted by the closure of the Vedanta refinery, as it resulted in increased imports of aluminium by India from China.

Increasingly, efforts at shaping perceptions to stall government initiatives will gain salience, and this will be the defining challenge in the coming years. How information is managed and a narrative is shaped will become more and more relevant in each successive year. The pragmatic reforms that budget 2021 has signalled must hence also be accompanied by an appropriate narrative to shape the information environment. Winning the perception war is all about correct and judicious messaging, exploiting all available dissemination platforms, and keeping the messages delivered credible and truthful. This too must form part of the reform process, to prevent the stage being hijacked by forces inimical to the nation.

(Author Brief Bio: Maj. Gen. Dhruv C Katoch is Editor, India Foundation Journal and Director, India Foundation.)

[i] Speech of Nirmala Sitharaman Minister of Finance, Govt of India, Budget 2021-2022, https://www.indiabudget.gov.in/doc/budget_speech.pdf

[ii] Ministry of Finance, Govt of India, PIB, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1685332

[iii] Ministry of Finance, “GST Revenue collection for January 2021 almost touches ₹1.20 lakh crore”, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1693779

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