Budget 2021: How Nirmala Sitharaman can put India back on the growth track

Enthusiasm about Budget 2021 has been muted. Finding a balance between prioritising lives vs livelihoods, fiscal prudence vs budget largesse should be priority. But will Finance Minister Nirmala Sitharaman’s third budget have something for everyone as indications suggest?
Today, almost a year after Covid-19 descended on India, we are fully cognisant of the far-reaching impact of India’s healthcare system on people’s lives, their jobs, education, economy and collective morale. What is needed is enhanced spending on healthcare. The envisaged 2.5% of GDP is still a far cry from the current 1.3% allocation. It is also imperative to address the R&D needs of the pharma sector, beyond the current Covid-19 vaccination drive.

Covid-19 has also demonstrated the digital divide between the haves and have-nots, especially in our education system. Wide access to good teaching can be made possible through digital means. Lack of good teachers is a serious constraint that can be addressed through edtech. Substantial budgetary allocations for digitisation will attract many more school children. Education and skilling are tools that will empower the poor.

The fiscal challenge Covid has provided is also an opportunity to expedite the pace of reforms. GoI can use the budget to announce its further intent and follow up land and labour reforms. Removal of residual sector caps on foreign investments can provide further impetus to the ‘Make in India’ story. An appropriate regulatory and intellectual property (IP) regime for toll manufacturing should also be considered.

India’s manufacturing capabilities can then be leveraged by global players. There are certain tax considerations that can make Gujarat International Finance Tec (GIFT) City more attractive to overseas financial services providers. An enabling environment for development of a corporate bond market in India should also be created. Allowing institutional and retail investors a wider selection of credit investments will go a long way in the growth of credit markets in India, and lessen demands made on GoI and banks.


GoI’s balance sheet should be lightened to raise resources. Pension and sovereign funds, and stressed asset funds together with global corporates, would have interest. Apart from the traditional disinvestment route, Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT)-type structures for State-owned assets should be considered. Also, monetisation of assets to unlock capital for reinvestment, and the use of 360-degree data analytics — particularly in indirect tax — can significantly boost revenues.

India needs to leverage digital technologies, make cybersecurity a national agenda, and harness the full potential of artificial intelligence (AI), cloud computing, blockchain, etc. Organisations should be incentivised to invest substantially in these technologies to be globally competitive.

Agriculture was the only sector that grew in the April-June 2020 quarter among the eight sectors selected to compute India’s GDP. Gaps in supply chain, storage infrastructure and availability of input, including high quality seeds, need to be addressed. Ensuring adequate allocation for storage, logistics and distribution will make agri value chains resilient, and reduce wastage and price fluctuations in farm products. GoI should continue to support farmer producer organisations in their capacity building and in strengthening their global supply chains, especially in horticulture and animal husbandry.

While investments are crucial, India needs a significantly enhanced focus on skilling and innovation. Diverse job opportunities must be created, and the youth made employable by requisite skills imparted to them. Schemes on imparting technical and vocational education and training (TVET) need a substantial boost.

The production-linked incentive (PLI) scheme, investment promotion and the favourable tax rates levied on these are attracting investments. Availability of skilled resources will enhance India’s attractiveness as an investment destination. Budget 2021 will be an implementation document for GoI’s vision to get us back on the flight path.

The writer is chairman, PricewaterhouseCoopers (PwC) India