Sanjeev Kumar Patro

Bhubaneswar: The third budget of Union Finance Minister Nirmala Sitharaman is coming in an extraordinary time. The pandemic pain is writ large on the country’s economic fundamentals.

Sample this. The Indian economy (the real GDP) is set to contract by7-8 per cent in FY2020-21 budget estimates and the fiscal deficit (The aggregate revenue receipts of Centre minus the aggregate expenditure) is projected to rise to7 per cent as against the target of 3.5 per cent in 2020-21 Budget Estimates (BE).

The doubling of fiscal deficit shows how the revenue receipts of the central government have fallen drastically, but the expenditure has increased manifold due to the pandemic.


As per ICICI Direct projection, in the coming financial year 2021-22 (FY 22), the economic growth will bounce back in India. The pandemic pain will peter out soon.

It said while the real GDP is likely to bounce back to around 10 per cent in FY 22, the nominal GDP (means the growth of the economy at the current rate of inflation) is predicted to clock a 15 per cent growth.


  • As per SBI research, Union Fin Min Nirmala Sitharaman is not in an onerous situation. The SBI data shows revenues of Centre has picked up, and also the Centre has a surplus cash balance that will come to FM’s aid in curtailing heavy borrowing from the market – that carries the inherent risk of hardening interest rate and thereby crowding out private players from the bank credit market.
  • Also, as per ICICI report, the buoyant capital markets in the present fiscal (FY21E) are seen supporting the government finances with an incremental tax inflow of around Rs 45,000crore (Rs38,000 crore as capital gains on investment/trading and around Rs 7,000crore as incremental STT (Security transaction tax)


  • The Budget 2021 to mobilise funds will focus on privatisation of PSUs. Also, asset monetisation policy would remain on the radar to partly offset a Covid induced shortfall in tax revenues, and thereby contain the deficit to an acceptable level.


Here’s how economists all over predict the ‘extraordinary’ budget this year will be?

The Budget will aim for a sustainable long-term growth plan, say economists of ICICI Direct.


  • Housing, construction and infrastructure will remain the key growth pillars in the Budget. Because the sectors have a high multiplier effect.
  • In budget 2020-21, the government had launched the National Infrastructure Pipeline (NIP), envisaging completion of 7,300 projects valued at Rs 111lakh crore for the period of 2020-25.
  • For which, this budget may moot for setting up of Development Finance Institution (DFI). Because, for realising the NIP, the government has to spend Rs 20 lakh cr every year.


  • Faced with the ‘black swan event’ of Covid-19, the government would focus in a big way on healthcare.

The big note here is India remains one of the lowest spenders even among the BRICS nation on healthcare.


  • In this backdrop, the ICICI economists make a projection that despite budgetary constraint, the allocation for the healthcare sector in this budget may be hiked to Rs 1lakh crore (including Rs 24,000 crore for Covid-19 vaccination)


  • In order to meet the unemployment challenges induced by Covid-19, economists are unanimous that the budget will give a boost to manufacturing and job creation. And the MSME sector will be the centre of focus.
  • The budget is going to give a booster pill to the 2Ts – Tourism and Textiles – that have the potential of high job creation.
  • For that, the Budget may go for tweaking of the customs/import duty. Also, the PLI (Production Linked Incentive) scheme in textiles will be strengthened.


  • Due to the pandemic, the mega rural employment programme this fiscal (2020-21) saw an extra allocation of around Rs 40,000 crore in addition to the 2020-21 budget allocation of Rs 61,150 crore. But this is an extraordinary year.
  • Therefore, the allocation for the programme in the upcoming budget will be raised to Rs 75,000 crore.


As per ICICI direct estimates,


  • The sector is one of the strategically important sector carrying an allocation of nearly 14 per cent of NIP CAPEX (capital expenditure) over the period FY20-25
  • The ICICI economists, therefore, expect an outlay of Rs 1.79 lakh crore for the railways in the budget.


With the Galwan valley clash still fresh in memory, along with the imperatives of India’s defence needs. Economists forecast the following.

  • We expect the overall defence budget to grow by 7.5 per cent to Rs 5.07 lakh crore, while the capital outlay on defence is expected at Rs1.26 lakh crore.
  • As ‘Atmanirbhar’ to remain the cornerstone of the budget, in the defence sector some key announcements likely on import embargo, increase in FDI limit, defence exports promotion etc.


  • On the overall Capex front, ICICI-D anticipates overall Capex spends are expected to bounce back to Rs3.5+lakh crore levels in FY22.


  • In the upcoming Budget, Ministry of Housing & Urban Affairs is likely to propose a parallel programme to provide tap water connection in every urban household by2026. According to the ministry, ‘Jal JeevanMission-Urban’has set a target to provide water tap connection to nearly2.68 crore urban households by2026.