Why FM Will Score
Fortune India|January 2022
The success of Nirmala Sitharaman's supply-side measures, robust tax numbers and an upbeat industry mean the finance minister has a lot going for her as she readies Union Budget 2022.
JOE C. MATHEW AND ASHUTOSH KUMAR

UNION MINISTER for finance and corporate affairs Nirmala Sitharaman chaired the last of eight virtual pre-Budget consultations on December 22. Over 120 invitees representing various stakeholder groups from industry, services, infrastructure, agriculture, financial services, capital markets, trade and social sector participated. The prevailing mood was of optimism.

Just two days earlier, Prime Minister Narendra Modi hosted a pre-Budget interaction with chief executives of India’s leading companies at his residence on Delhi’s Lok Kalyan Marg. Kenichi Ayukawa of Maruti Suzuki, Udak Kotak of Kotak Mahindra Bank, T.V. Narendran of Tata Steel, Sanjiv Puri of ITC and Preetha Reddy of Apollo Hospitals attended in person, others joined virtually. On December 17, he hosted a similar interaction with representatives of venture capital (VC) and private equity (PE) funds.

For the past few years, such direct feedback has been a welcome change for businesses, who rarely get such sessions. As they met, one item was missing from the laundry list: the lengthy wish-list for the coming Budget. Instead, the industry noted the growth initiatives following Budget 2021 as Covid raged, expressing hope that the coming Budget will also be growth friendly.

While Tata Steel’s Narendran noted the timely response to Covid-19 outbreak, leading India to V-shaped recovery, Kotak appreciated the ‘path-breaking changes like Swachh Bharat and Start-up India’. Ayukawa stressed Maruti Suzuki’s commitment to realise the PM's vision of making India a manufacturing giant. The meeting with VC and PE representatives was no different. Noting the initiatives taken to boost the start-up ecosystem, venture capitalist Siddarth Pai termed Modi a ‘Start-up Prime Minister’. The PM said, “just like a country aspires for a podium finish at the Olympics, India wants to see its industries among the top five of the world in every sector.” He assured his government was “firmly committed to initiatives to boost economic progress of the country”.

Ahead of Budget 2022, India Inc. and the union government seem confident of better days ahead, amidst renewed concerns of a newer, highly transmissible variant of Covid-19 virus—Omicron.

Going by the latest macros, the confidence is not off the mark. As finance ministry gets busy with preparations for Union Budget FY2023, chances of a sharp economic recovery are getting brighter (see Robust GDP Growth Projections for FY22). Revenues from taxes on petroleum products are at a record, there has been a steady rise in Goods and Services Tax (GST) collections, good growth in advance tax revenues (up 53.5% y-o-y till December 16) and steady foreign direct investment (FDI) inflows. And India is now the third-largest start-up ecosystem in the world after the U.S. and China, says Hurun Research Institute, after adding 33 unicorns in 2021. The economic recovery, after the FY2021 Covid-19 scare, is real (see GDP Growth Over The Years).

Most importantly, unlike Western economies which spent their stimulus dollars on reviving demand (that is now triggering mega inflation and derailing economies), India took a completely contrarian bet with supply-side stimulus. As a result, it stands out as a country that revived its economy without busting the government's balance sheet. The government, in fact, may surpass its revenue targets for FY2022 and almost achieve its fiscal deficit target (see Buoyant Rise in Revenue Receipts). With that, the Indian model could be a benchmark for dealing with future economic crises.

Industry has sensed this change.

So, while the confidence of government and industry indicates the score card of this year’s performance, it also hints at growth orientation that Union Budget for FY2023 is likely to have. Is the optimism of government and industry justified?

A Contrarian Stimulus

$20 trillion! That’s what global economies and central banks jointly deployed to support businesses and financial markets as the spread of Covid–19 triggered lockdowns from March 2020. But India, unlike others, steered clear of direct consumptionled revival. Its relief measures revolved around supply-side initiatives. Eighteen months later, India is ahead of most countries in economic recovery. The contrarian bet is paying off.

The events started rolling off in the last week of March 2020 when RBI and central government acted in tandem to announce an initial stimulus to cushion the impact of Covid-19. RBI reduced repo rate by 75 basis points to 4.4% on March 27. It also infused liquidity to the tune of 3.2% of GDP. This coincided with the ₹1.92-lakh-crore PM Gareeb Kalyan Anna Yojana (PMGKAY) for food grain to the poor, announced by finance minister Nirmala Sitharaman on March 26, the second day of the national lockdown.

But the big bang came 48 days later (May 12), when the prime minister announced the ₹20.97 lakh crore economic stimulus (10% of India’s GDP), called the Atmanirbhar Bharat package. Three more phases of the package were rolled out in October 2020 (₹73,000 crore), November 2020 (₹2.65 lakh crore) and June 2021 (₹6.28 lakh crore), taking the total to ₹30.64 lakh crore. The ₹20.97 lakh crore stimulus rolled out in May last year included liquidity enhancement worth ₹8 lakh crore announced along with monetary policy measures in March and April last year.

The package aimed at productivityled growth with loans and advances to vulnerable businesses for working capital, credit facility, interest subvention, partial credit guarantee schemes and fund of funds for SMEs. This was in sharp contrast to the demand-led fiscal stimulus given by U.S. ($2.3 trillion in three phases), European Union ($826 billion) and Australia ($257 billion, enhanced in Budget proposals for FY2021).

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM FORTUNE INDIAView All

Payments Banks' Trial By Fire?

Contrary to market perception, payments banks such as fino and airtel have turned profitable.

6 mins read
Fortune India
May 2022

Learning To Live With FinTech

It Takes Two To Tango, And Banks And Fintechs Are Increasingly Realising This. While Such Tie-ups Help The Former Slash Operational Costs, For The Latter, It Promises Access To A Wider Universe. In The End, It's A Win-win For Both.

10+ mins read
Fortune India
May 2022

India Inc's Tryst With Metaverse

Large Companies, Platforms, And Enablers Are Tapping An $8 Trillion Global Opportunity. Can It Live Up To The Promise?

10+ mins read
Fortune India
May 2022

Credit Suisse: India Adds To Global Balance Sheet

While The Switzerland-based Bank Is Facing Several Odds In Its Global Operations, The Indian Business Has Managed To Scale Up Considerably.

2 mins read
Fortune India
May 2022

India's D2C Brand Sweep

Brand-starved Bharat is fast embracing digital-first 'direct to consumer' brands. As competition heats up, it's financial heft and offerings that will differentiate. Who's ready?

10+ mins read
Fortune India
May 2022

PATHLABS: LIFE BEYOND COVID

Diagnostic chains reported bumper revenues and valuation during Covid-19 waves. Can they deal with the ebb to retain investor interest?

9 mins read
Fortune India
May 2022

GLOBAL SOVEREIGN DEBT TRAP

At $300 trillion of global debt, a 1% hike in interest rates could translate into $3 trillion additional interest outgo, equivalent to India's nominal GDP.

6 mins read
Fortune India
May 2022

DIGITAL AGILITY WILL DECIDE BANK WINNERS

WHILE DATA AND DIGITAL WILL DRIVE GROWTH, TRUST WILL BUILD A STRONG CUSTOMER BASE.

2 mins read
Fortune India
May 2022

SMALL FINANCE BANKS IN A LEAGUE OF THEIR OWN

SFBs ARE TAKING FINANCIAL INCLUSION BEYOND ACCOUNT OPENING AND CREATING INCOME OPPORTUNITIES IN REMOTE AREAS.

7 mins read
Fortune India
May 2022

THE BANKERS WHO SAW TOMORROW

THE MAIDEN FORTUNE INDIA-GRANT THORNTON BHARAT STUDY ON INDIA'S BANKS SHOWS WHAT IT TAKES TO WIN IN BANKING SWEEPSTAKES.

4 mins read
Fortune India
May 2022
RELATED STORIES

FOOD FOR Thought

All about food

2 mins read
Reader's Digest US
June 2022

THE TREE OF Life and Fertility

DR. V. RAMAKANTHA shares some insights into the science, history and mythology of the Banyan tree, also known as the Bengal Fig or Indian Fig. The Banyan is one of those mythical trees that has had an important place in the life and history of the people of India since ancient times. It is also home to many species of birds, animals, and epiphytic plants.

7 mins read
Heartfulness eMagazine
May 2022

East Meets West

KALYANI ADUSUMILLI grew up in a minority group in the United States, straddling cultures, learning how to fit in, and later learning how to accept the traditions of her heritage. Today, she is watching her children going through the same process, shifting their cultural identity, as they head toward adulthood in the melting pot of a multicultural society.

4 mins read
Heartfulness eMagazine
May 2022

NILANGANA BANERJEE: 2 series The 'Selves' | The Lullaby

The series Selves aims to artistically represent the psychological conflicts we face when we weigh ourselves based on socially determined of what is ideal and where we stand with the distorted and one-size that fits all defined.

6 mins read
Lens Magazine
April 2022

Why We Are Not Responsible Toward the Environment

DR. ICHAK ADIZES is an expert in change management for organizations. Here he shares some of the reasons why companies are not changing their actions in relation to the environment, even though everyone knows we are facing an environmental crisis. He also offers simple solutions that will bring change.

4 mins read
Heartfulness eMagazine
April 2022

Annadata Suraksha Abhiyaan

A tailor-made insurance initiative to financially secure farmers and growers against farming risks.

2 mins read
Heartfulness eMagazine
April 2022

The FORCE Behind the FORCE

How George Lucas created Hollywood's most beloved franchise

5 mins read
Maxim
May - June 2022

EVERYTHING YOU NEED TO GET STARTED IN MAGNET FISHING

In addition to treasure hunting, magnet fishing has an environmental aspect-it helps to clean up our waterways.

8 mins read
Popular Mechanics
May - June 2022

Sorry, iPhone 6 Plus users, your phone probably can't be repaired anymore

Apple moves two older devices to 'vintage' status.

1 min read
Macworld
April 2022

Self-Nurturing Through Nature

Secrets from a self-care sanctuary to help you find balance.

3 mins read
Yoga Journal
Spring 2022