Reading FM Nirmala Sitharaman's mind before Union Budget 2021

Finance Minister Nirmala Sitharaman’s remarks of a “Budget like never before” may have raised hopes of a big-spending plan in the Budget this year, but the resources at the hands of the government are too little to fulfil all aspirations.

The stakeholders will look at her Budget for credible sources of revenue, which is hard to get when the economy has slowed to an unprecedented level due to Covid-19 pandemic.

The government cannot raise taxes across the board because the pandemic has hit the poor and middle-income group below the belt. It may increase taxes in certain categories and will have to depend largely on non-tax revenues and market borrowings for the post-Covid-19 reconstruction of the economy.

Whichever way the finance minister chooses to raise resources, one thing is certain that the crisis-ridden economy cannot move further without an increased government spending.

Only government spending can revive an almost muted demand as also the private investment and business sentiment.