Improving the economy's software will be more important than the Budget itself: Arvind Subramanian

The government needs to find a way to restore dynamism to an economy that has long been weak and has now been ravaged by the COVID-19 pandemic, former chief economic adviser Arvind Subramanian wrote in a paper.

"In particular, in view of the latest grim assessment of the banking system by the RBI, measures must be taken urgently to address the protracted and worsening Twin Balance Sheet problem, including revitalizing the IBC (Insolvency and Bankruptcy Code) which was one of the government’s major legislative achievements," Subramanian said in the paper.

In a paper titled The Economy and Budget: Diagnosis and Suggestions, co-authored with Josh Felman, Subramanian argued that the government can build on its strengths, by extending new welfarism to additional goods and services, while continuing to expand coverage of the goods and services it has already targeted.

"The dilemma, of course, is that new welfarism requires resources, which have become particularly scarce after the devastation of COVID – and which can only be generated by injecting dynamism back into the economy," the paper said.