By Anjan Roy
The interim budget presented on February 1 is a hopeful document, pinning its faith on the continued buoyancy of the Indian economy.
At the outset, the finance minister, Nirmala Sitharaman, should be complimented for presenting the shortest and a crisp budget speech, instead of a meandering one of at least one and a half hours.
Following tradition of desisting from major announcements and changes in an interim budget, the finance minister principally laid a vote of account for carrying on government expenses.
But even within that limitations, the budget statement makes some clear points. Her speech shows the Indian economy in robust health. She could assume higher earnings for the government even without any hikes in rates, and a revenue buoyancy such that her borrowings targets next year were anticipated to be lower than the current year even in absolute terms.
Secondly, even within the constraints of an interim budget, she has proposed an ambitious research and development fund, with long term lending to start ups and other research and technology based units, for as long as fifty years. These are virtually grants for such activities rather than loans.
Supposedly, in the current environment of far reaching technology and research products, the government is seeking to place India at the forefront of such activities. It is not only the traditional manufacturing growth than the prime minister had been talking about for some years now, the government is setting itself targets and objectives of even more sophisticated AI and technology driven growth.
Coming to the hard core of the budget proposals, the finance minister has kept her entire tax structure unchanged, leaving the rates where they were, kept the capital expenditure at an ambitious level, and yet anticipates the fiscal deficit to come down significantly. Fiscal deficit in the 2023-24 fiscal year has been bettered at 5.8% of GDP, against the budgeted level of 5.9%. This is set to go down to 5.1% of GDP in 2024-25.
With lower estimated borrowing requirements, the finance minister said that both gross and net borrowing for the next financial year, 2024-25 would be Rs14.13 lakh crore and Rs11.75 lakh core next year. These would be lower than such borrowings in the current year. This could be singularly novel development.
In response to these announcements, the bonds markets in India have softened as with the prospects of lower government borrowings from the market, the interest rates could e expected to remain softer.
This could be possible only if the economy maintains a high growth traction yielding ever larger revenues to allow the government increase capital expenditure and at the same time peg the government deficit at a much lower level 5.1% of GDP.
With this underlying assumption of a high growth rate, the finance minister has announced a jump in public capital expenditure by over 11% to Rs 11,11,111 crore. It was immediately clear if the FM’ s fascination with “eleven” had some mystical qualities for self fulfilment.
Giving the budget mathematics, it is roughly true that the FM’s wishes could be easily fulfilled if Indian economy could hit a double digit growth rate, close to that magic figure of 11or thereabouts. That is a tall claim, but neighbouring China had for sometime grown by double digit.
Going by the recent trends, it is not a very unreasonable expectation as India continued to grow fast even when the rest of the globe economy was showing signs of slowing down, particularly our large neighbour, China.
As for the other features of the current interim budget, the finance minister has stuck to the anticipated political script.
By way of her idiom for the budget, Ms Nirmala Sitharaman has tried to appease the vote banks. She has kept four segments of the population in sight for special attention, whatever that could mean in practice. The budget aims to address the development needs of four broad segments of population: the poor, the youth, women and farmers.
All governments work towards the development of the poor and bring relief to them. Years back, Ms Indira Gandhi had brought to the fore this issue with her “Garibi hatao” programme. Till today, the poor is still there high on government’s populist menu. No exception is the current government.
She has claimed credit for lifting 250 million people from under the poverty levels since 2014. The government, she says, would like to move away from entitlements politics to making the poor a part of the entire development process. She has claimed that the direct benefits transfer policies had worked wonders.
Women entitlement is the second plank of the populist appeal of the budget when a general election is just months away. Since a half of the population are women, it is reasonable strategy to follow policies for women entitlements.
As for the youth, the finance minister has recounted the initiatives to provide better schools and education. She has recounted the setting up of new IITs, IIITs, business schools and other bodies. Additionally, the youth being given scope for achieving better skilling and expertise.
However, the finance minister does not make references to youth employment trends and schemes. After all educated youth unemployment is a major issue and scores of educated youth are not getting the kind of jobs they aspire to.
Of course, these are not unique to India and fast-growing China has been facing similar problems about youth employment, so much so that the Chinese have stopped putting out figures on youth unemployment in view of the surging numbers.
Farmers are always a critical section for all governments. Institution of an electronic national farm products trading platform has helped farmers to go directly to the market and get a better price. Better schemes for crop insurance and other cushions to meet with the uncertainties have also been instituted.
Not surprisingly, the finance minister had set her budget as a milestone statement of the achievements of the current Modi government in sound economic management. As of now, things are looking good and the economy is doing fine.
In fact, the Indian economy has the resilience to grow and develop on its own, provided the government does not do anything harming the economy and its rhythm. The stunted growth record has been mainly the handiwork of governments, mostly unwittingly. (IPA
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