It is not unusual for people to have a heap of expectations from the budget and it is more so after a year of extreme economic distress, job losses, and demand destruction. The government and the Reserve Bank of India initiated several measures to combat the adverse economic conditions. This resulted in an infusion of more funds into rural employment programmes, targeted sectoral measures and ample liquidity in the interbank market, lower interest rates and an easy money policy.
The economy is showing early signs of recovery and what is important is that we need to sustain this rebound in economic activity. The measures that may be announced in the budget would have an accent on supporting and sustaining this recovery.
It was also a year of record government borrowings, both by the Centre and state governments. In the normal course, we should expect normalisation after a difficult year. The budget will have to continue with quite a lot of measures that were introduced in the wake of the pandemic.
The budget is expected to spell out the glide path to fiscal consolidation, after a year of avoiding the deficit norms. Governments across the globe resorted to spending to give a boost to their economies and our government did the same. Nobody is going to penalise us for this but how we establish normalcy will be watched keenly not only by domestic players but probably, more eagerly, by overseas investors. If government borrowing is somewhere close to the last five year's average, plus or minus 5 to 10 percent on the gross borrowing, it may not matter much to the government in terms of the future cost of borrowing. However, if it exceeds, then it may have some impact on the long- end yields.