The country cannot afford to have mundane Budget 2021 as it comes in the backdrop of a severe economic crisis triggered by the Covid-19 pandemic that has hit all sectors of the Indian economy. Finance minister Nirmala Sitharaman should present an imaginative Union Budget to facilitate economic growth and generate employment, reviving the GDP growth and creating an inclusive economic environment to ensure that no one is left behind.
The Indian economy needs to realize its potential to become a global economic powerhouse. Key macroeconomic indicators such as gross domestic product (GDP), economic growth rate, unemployment rate, and industrial output are pointing towards a deep-rooted malaise in the economy. At the centre of the crisis is a slowdown in demand and investment that has affected the economy’s ability to create jobs. India needs a course correction to return to high single-digit economic growth rates.
Budget 2021: Focus on job creation
The top priority of the finance minister in Budget 2021 is creation of sustainable employment for taking full advantage of the demographic dividend. The crisis aggravated during the slowdown and is reflected in job creation. Unemployment rate has hit a four-decade high. Around 7.8% of all employable urban youth are jobless, while the figure for rural India is 5.3%. The working-age population (those above the age of 15) is expanding by 13 million a month. India needs to create sustainable job opportunities for 18.6 million people a year to ensure that the demographic dividend is not frittered away.
The World Bank estimates that the country needs to create 8.1 million jobs a year to sustain the current employment rate. But the numbers so far are far from encouraging. The agriculture sector, the only segment of the economy still growing albeit at a slow pace, is unable to absorb a large chunk of the workforce as it used to earlier.
The lockdown has resulted in huge job losses and a large chunk of the urban labour went back to villages. It needs to be seen how many of them will return to their workplaces or get their jobs back. Whether the employment rate will show a sustainable increase or it is just a temporary post-lockdown phenomenon is what remains to be seen.
Budget 2021: Infrastructure focus key to economic growth
Budget 2021 must focus on infrastructure growth, both in rural and urban areas, to achieve better connectivity, as well as growth in industrial sector and employment. A systemic approach to create value addition at local level to generate jobs in a sustainable manner should be on top of the finance minister’s agenda. The government must focus on going back to the drawing board and working our way forward by untangling the threads, cutting open silos and taking a holistic approach to policy making.
India cannot afford to let go of the opportunity to trigger massive infrastructure activities to generate quality jobs. Another important step will be value addition to agriculture produce right in the villages to create wealth and jobs. This is a pre-condition for the processing industry with efficient marketing chains.
The Union Budget 2021 should put more money in infrastructure so that core industries such as mining, metals, cement, and equipment will have a huge market opportunity. Industrial activities with agriculture produce as raw material like making menthol from mint leaves, making pulp from fruit is a sure-shot way to create wealth and jobs in rural India.
Any delay in course correction will have a negative impact on job creation. Job losses, low spending, a dip in manufacturing, and lower borrowings could be the result, leading to low GDP growth.
There should be a predictable policy environment to make the economy attractive to foreign investors who will bring the latest technologies to the country. India’s famed demographic dividend could turn into a nightmare if the government fails to address the issues in education, health and job creation. The government should involve all stakeholders in developmental activities, instead of indulging in blame games.
(Aruna Sharma is a New-Delhi based economist and policy analyst. She is a former secretary, government of India. Views are personal.)