The Union Budget for 2023–24 has been presented and largely meets expectations. Given that this was the final full budget before next year’s general elections, the challenge for Finance Minister Nirmala Sitharaman was to strike a balance between populism and prudence. But keeping away the populist moorings to give out freebies before the national election the Modi government has stuck the right note to present a budget that is both balanced and prudent. In this context, this article will look into why Budget 2023 is not a ‘battle line’ drawn before the election but a visionary document keeping up with the government’s trend to put India on the path of long-term growth.
The Budget FY24 will be known for the government walking the talk to the tone of Sabka Saath Sabka Vikas mantra. In continuing the earlier years’ themes, the Budget integrates various social schemes to create a holistic effect- enabling a ‘domino effect’. It will be also known as a continuation of previous budgets- setting the country on a stable path even amidst Covid and war woes.
‘Shining Star’ In A Slowing World Economy
In a difficult global macroeconomic backdrop, continuing impetus on capital expenditure the finance minister announced a significant jump in planned CAPEX to ₹ 10 lakh crores. It should help further improve India’s prospects of continuing to be outshining with strong GDP growth numbers with 10.5 percent FY24 nominal GDP estimates set out. This further helps in job creation across infrastructure, railways, power, and among others. India remains a ‘stable ship’ amidst a turbulent economic environment in the ‘sub-continent’. All of our subcontinent neighbors are reeling from the turbulent economic situation, Afghanistan is in utter chaos, Sri Lanka is in meltdown and Bangladesh is suffering strains due to runaway inflation, declining forex reserves, and social unrest. Even when the EU (3.5%), USA (2.9%), and China (3.4%) are slowing down, but even amidst this India is expecting to maintain a growth rate of 7%. The budget 2024 takes on to focus this key vision of outperforming global peers to take the top spot in the race to be an economic superpower.
Keeping The Scales Of Revenue And Deficit In The Balance
A 45-trillion-rupee ($550 billion) budget spending plan seeks to narrow the budget gap to 5.9% of the gross domestic product in the fiscal year starting April from 6.4% of GDP this year. This was made possible as the government set a target to increase tax collection by nearly 12% to 23.6 trillion rupees next fiscal year. The narrower deficit forecast ‘underscores the government’s commitment to longer-term fiscal sustainability’. Tax collections in 2022-23 are on course to better their own projections. During the April-November period of the current financial year, gross tax revenue registered a growth of 15.5% year-on-year. Net tax revenue to the center after the assignment to states grew by 7.9% on a year-on-year basis in the first eight months of 2022-23. Budget 2023 takes a leap in reducing India’s fiscal deficit while maintaining robust revenue growth.
Infrastructure: The Building Block Of ‘New India’
Infrastructure is the foundation of long-term economic development and this budget sets out to do just that. Over the last three years, and particularly after the pandemic, the government has consistently hiked the allocation for capital spending. Capital spending has a much higher multiplier effect – 2.5x – and hence adds more to economic output than revenue expenditure comprising salaries, pensions, interest payments, etc. In just three years, the capital expenditure outlay has more than doubled to ₹10 lakh crore (over 3% of the GDP) from ₹4.39 lakh crore in 2020-21. This is an acknowledgment that the strategy of higher government spending to draw in private sector investment is yet to show results; in other words, the government needs to continue to spend a lot more on infrastructure to crowd in the private sector. Complementing the Centre’s CAPEX push, Sitharaman has allowed states to raise up to ₹1.3 lakh crore through 50-year interest-free loans. The effective capital expenditure (which includes grants to states) is budgeted at ₹13.7 lakh crore for the next year, almost 13 percent higher than in 2022-23These budget provisions build on the government’s National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India’ and the production-linked incentives (PLI) scheme to augment the growth of infrastructure sector. The vision of the government is in tandem with building a new India with a ‘visible and credible’ infrastructure.
The Pro-Poor Tool Called Direct Benefit Transfer (DBT)
Linking the poor to benefits has been continued in this budget. Since DBT started using technology ₹26.5 lakh crore has been transferred for central programs. It has also helped the center to save about ₹2.2 lakh crore as of March 2021 by removing the names of 9.4 crore fake beneficiaries across databases. India’s vision to step up for the poor has been inspiring for the whole world within the span of the past decade, the DBT has already expanded from 24 schemes in 43 districts to 200 central schemes and over 2,000 state government schemes pan India. The number of central schemes rose to 426 in the year 2019-2020, when more than ₹3,81,000 crore was transferred to 144.7 crore beneficiaries, helping provide relief to those whose livelihoods were impacted. The number of schemes fell to 316 in 2020-21, and 313 in 2021-22, but the funds transferred rose to over 5,52,00 crores (179.9 crore beneficiaries) and over 6,30,000 crores (179.9 crore beneficiaries), respectively. In FY 2022-23, as of 5th Jan 2023, over ₹3,80,000 crore has been distributed to 159.5 crore beneficiaries for 310 programs. The DBT scheme has enabled the accurate identification and targeting of beneficiaries and made it easy to avail of services through online applications. It ensures transparency in the transfer of funds as well and has eliminated the existence of middlemen and agents, thus curbing leakages in the delivery process. India’s DBT implementation has won praise from the International Monetary Fund and the World Bank, as well as many other international organizations, for efficiently providing support to the underprivileged sections of society.
Keeping 2024 Election Out Of The Picture
The budget scores high on multiple parameters: it has steered clear of pre-election populism, played the right counter-cyclical role, and continued fiscal consolidation, all the while staying the course on long-term reforms. The absence of outright populism has been the essence of the budget. The budget tends to look beyond the 2024 elections. Many opposition parties are giving to the idea of ‘populism’ to win over votes. This has been evident from the restoration of schemes such as ‘OPS’ by opposition-ruled states. In this context, budget stands as a ‘shining star’ amidst a galaxy of not-so-development-friendly ‘populistic’ and ‘opportunistic’ politics. Thus, the budget clearly set out a new perspective for India to carry on the path of growth in the future.
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