Consumption protection and employment promotion should be the dual priorities of the upcoming national budget during the pandemic, said renowned economist and public policy analyst Dr Debapriya Bhattacharya.
To this end, the government has to give direct and substantive fiscal support to the traditionally disadvantaged communities as well as to the "new poor", he said in an interview with UNB about the national budget for fiscal year 2021-22.
Debapriya said the new budget also needs to promote domestic market-oriented industrial diversification and introduce a universal social protection system.
He said the expansionary fiscal policy should focus not on maximising the public expenditures for health exigencies, but on putting more disposable income into the hands of disadvantaged households and investable resources into the hands of micro, small and medium enterprises (MSMEs).
The economist said the new budget should neither increase tax rate nor apply new taxes, but should focus on improving efficiency of the tax administration to prevent tax leakages and evasion, stop undue exemptions and definitely discontinue favouring launderers of black money.
Noting that one of the fundamental issues for the next budget would be dealing with the protracted impact of the pandemic, Debapriya said the last budget was done under the incorrect assumption that the pandemic would vanish within 3-4 months and then normalcy would be restored in the economy.
"At that time, we pointed out that even if health emergencies subside, socio-economic impact of pandemic will be felt much longer. Now 12 months later, we are in the midst of another Covid peak."
The basic point is that, under the circumstances, public expenditure choices and other fiscal decisions within one-year time-frame is not appropriate from policy perspectives, he said.
"So, a 'core budget' focused on defeating the pandemic and recovering from the fallout demand a time policy frame of at least two-three years. This has to be aligned with the current Five Year Plan [2021-25], SDG delivery schedule and climate action commitments," Debapriya added.
He observed that the development variable needs to be reprioritised from the point of view of employment retention and generation and no less important will be protection of consumption.
Favouring an expansionary fiscal policy, he emphasised the need for accelerating public expenditures and improving supply of liquidity to boost domestic demand for goods and services.