The grand churn: Seeking elixir of growth

The Union Budget for this year is unlike the budgets that Nirmala Sitharaman had presented the last 3 years around. It was short; barely lasting an hour and a half and had none of the usual attempts at storytelling, lore and populism for the next important election. The budgets that get presented now are extremely important in the sense that they lay the foundation for the India of 2047 (when India attains 100 years of freedom from British rule). The direction of fund allocation focusing on public investment will energise growth in its attempt to turn into a $5 trillion economy and more.

The budget is in continuum, spelling out the government’s stance to adhere to a fairly conservative fiscal deficit. This is indeed creditable as even on a nominal growth basis, the GDP will be over 11.1 per cent. The rather “underestimate” in growth is perhaps a contingency plan lest the COVID-19 re-surfaces at a time when the economy seems to be in recovery mode. However, a cause for worry is the custom duty increase as this could well mean that the government is moving back to the import substitution era in the name of ‘Aatma Nirbhar’. So, while the prices will be competitive, the products will not meet the goal of self-reliance as envisaged grandiosely by the government in its programme.

Another key aspect to be taken into account is the record high collection in GST in January since its implementation. This possibly reflects the government’s ability to manage the collections better by going after the defaulters and those who have not reported their incomes. From states’ perspective, this augurs well as the devolution of revenue will be much more. It also is a pointer to the scope for a better management on the GST front by the states. On the exports side, the performance has been picking up pace. Also, the announcement on the crypto currency side, is a laudable one though from a farm, education and health perspective, there could have been some more emphasis.

The most significant figure in the entire budget is the 35.4% increase in capital expenditure in 2022-23 to Rs 7.5 lakh crore. The government understands that in the absence of recovery in private investment, it is imperative that it opens its coffers and spend liberally to boost the economy via public investments. This, it plans to achieve by spending on infrastructure primarily through roadways and railway projects. There is also an increased emphasis on building domestic manufacturing capacity across sectors such as defence and electronics. At a time, when the focus is on clean energy and reducing carbon footprint is gaining momentum, the budget has tried to allocate funds in the area of solar energy (module manufacturing through a production linked incentive scheme) and raising money through sovereign green bonds.

The focus on infrastructure and capital expenditure, coupled with support for the states to do the same, comes on top of a number of welfare schemes targeted at the poor. Several of these are ongoing, and have been the hallmark of the current government. These include the ‘Nal Se Jal’ scheme (piped drinking water for all), the programme for low-cost housing, gas connections for the poor and several others. There is a substantial allocation for Minimum Support Price (MSP) payments as well as an idea to develop green agriculture. Thus, there is a balance between development objectives and welfare programmes, in an attempt to reach out to both ends of the spectrum. Of course, in this, the guy in the middle, the salaried middle class, gets nothing!