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Budget 2021: Centre bets on multiplier effect of infrastructure projects to create jobs, boost demand

The problem with the emphasis on large infrastructure projects is that implementation can be delayed due to a variety of reasons including land acquisitions and environmental clearances.

February 01, 2021 / 08:24 PM IST

The Budget will deliver growth, create jobs, restore incomes and boost consumption. But more likely over a medium-term rather than in the immediate few months. This is because the focus is on infrastructure building and construction, which takes time to deliver results.

Many of the projects announced by Finance Minister Nirmala Sitharaman will be built over a period of over five years, create durable assets and deliver growth in the medium term rather than provide a short-term boost. The government is betting on the fiscal multiplier effect of infrastructure projects – estimated at 2.5x – to achieve its objective.

The problem with the emphasis on large infrastructure projects is that implementation can be delayed due to a variety of reasons including land acquisitions and environmental clearances. Land acquisition is not easy and that will affect the execution of several proposed projects such as expansion of highways and roads, metro rail projects and textile parks.

The government, however, expects that these projects will begin creating jobs even as they are still on the drawing board. Preparatory work is expected to increase activity in industries that have forward and backward linkages with these projects and that can create demand for people with a range of skills.

For the short term, projects that provide a livelihood to the bottom of the pyramid will continue to be supported, but the government seems determined to shift workers to projects that increase national connectivity such as highways and freight corridors and boost various sectors.

The government has assumed that demand for work under the Mahatama Gandhi National Rural Employment Guarantee Scheme (MGNREGS) will decline as growth picks up and implementation of infrastructure building projects gathers pace. Thus, the outlay for the scheme has been lowered from the enhanced allocation made for it when migrant workers returned to villages. The Union budget provides Rs 73,000 crore for 2021-22 compared to the enhanced outlay of Rs 111,500 crore for 2020-21.

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There is a plan to augment rural incomes by encouraging farmers to take up horticulture. For this, Operation Greens Scheme is being expanded to cover 22 perishable products. The scheme, first announced in 2018-19, currently covers only potato, onions and tomatoes. The scheme encourages the creation of farmer producer organisations, investment in farm-gate infrastructure such as processing facilities and provides short-term price stabilisation.

Improvement in the health infrastructure by supporting rural and urban health and wellness centres, setting up integrated public health labs, establishing critical care hospitals and operationalising public health units at ports of entry, if implemented quickly, will create more jobs for nurses, doctors, lab technicians and other health and sanitation workers.

The plan to augment city bus service and ramping up capacity to recycle ships are all good plans to create more employment not just in transportation and in the recycling industries but also in other allied sectors.

Follow Moneycontrol's Union Budget 2021 live coverage here.

Likewise, the launch of Jal Jeevan Mission (Urban) and expansion of Swachh Bharat Mission will create employment for millions of people, many who are unskilled workers. Both of these programmes are to be implemented over the next five years.
Tina Edwin is a senior financial journalist based in New Delhi.
first published: Feb 1, 2021 08:10 pm

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