Pragmatic in approach, nuanced by construction
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Against the backdrop of sharp deceleration in growth in the wake of an unprecedented global health crisis, the FY22 Budget has emphatically provided a much needed thrust for healthcare spending, job creation, and overall economic recovery, all within the ambit of deft fiscal rectitude. The announcements made by the Finance Minister should be seen in conjunction with government’s previous announcements under various fiscal packages encompassing Pradhan Mantri Garib Kalyan Yogana and Atma Nirbhar Bharat Abhiyan.
From an objective standpoint, in a year of difficult fiscal computations, the Finance Minister has walked a tightrope to balance the stretched revenue receipts with necessary expenditure support. At 6.8 per cent of GDP, FY22 fiscal deficit is a realistic display of support to reinvigorate India’s Real GDP growth, which is projected at 11 per cent, albeit supported by low base.
Updated Feb 02, 2021 | 07:03 IST
Finance Minister Nirmala Sitharaman has proposed creating an asset reconstruction company (ARC) for India s bad-debt laden lenders to offload soured assets. ARC may only give banks respite from toxic debt flood | Photo Credit: BCCL
New Delhi: India s plan to set up a bad bank may boost valuations and ease short-term stress for state-owned lenders, but bankers and sector insiders are concerned it will not solve deeper problems.
Finance Minister Nirmala Sitharaman has proposed creating an asset reconstruction company (ARC) for India s bad-debt laden lenders to offload soured assets, which some analysts estimate now total $100 billion. It is a good move but there are more fundamental issues on how to recognise problem loans early and resolve them, which still need to be fixed, Sanjoy Datta, Deloitte India financial services practice head, said of the budget proposal.
An eye on the future Budget 2021 pushes the growth pedal
Bold measures have been proposed in the budget, such as privatisation of two public sector banks and a general insurance company in this fiscal, higher FDI in the insurance sector, exhibiting India s confidence to be globally competitive
Dilip Chenoy | February 2, 2021 | Updated 14:36 IST
While the budget scores high on many commendable and path-breaking proposals, the key lies in successful implementation of the vision
The spectacular green signal given by the markets to the budget is a clear evidence that this is a budget for nation-building. The government has re-affirmed its commitment to taking the reforms forward, and despite the aberration due to COVID-19, is steadfastly focused on running the course of making India a $5 trillion economy.
Letters to the editor dated February 2, 2021
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A bad bank is good
Finally the shape of a bad bank has been finalised. The new asset reconstruction company would be predominantly owned by the government. The existing ARCs are hampered by shortage of capital. In the FM s words the proposed Asset Reconstruction company limited and and Asset Management company will take over the existing debt and then manage and dispose of the assets to alternate Investment Funds and other potential investors for eventual value realisation. So far so good. The removal of stressed assets from the PSBs will make them focus on fresh lending without the fear of NPAs. Secondly since it is owned by government PSBs would be more confident about making larger haircuts. Sovereign backing of ARC will enable it to raise funds for restructuring viable units. But on the flip side, pre-Covid NPAs are already provided for. Secondly most of the stressed assets are not backed by assets and finally have to
The government must focus on implementing the disinvestment and privatisation programme to generate revenues.
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Union Finance Minister Nirmala Sitharaman speaks during the post-budget press conference, at National Media Centre in New Delhi. (Photo | Parveen Negi, EPS)
The Union Budget presented in the wake of the pandemic led economic contraction lays out many proposals to strengthen the current V shaped recovery and sets India on the path to high growth.
We believe that the Budget has met the twin challenges of boosting growth while laying down a path to fiscal consolidation. It prioritises growth in the immediate term while taking a medium-term view of fiscal consolidation. It has also announced some path-breaking reforms.