Centre could have delivered more, fiscal deficit still a worry: Expert
The Budget 2022, in some sense, looks like what is expected of the budget — a statement of intent rather than a balance sheet of the government. However, had the budget been more direct on specifics, and not just a lot of promises/potential actions, it would have delivered a lot more. The idea of Inclusive Development, Productivity Enhancement, Energy Transition and Climate Action are all good and well-meaning agendas; but the same have been parroted many times over. So, what one would have expected to see is, what concrete action is being proposed in this budget and to that extent, the budget definitely falls quite short.
In particular, let me take this opportunity to call out a few salient issues in the Budget. The biggest worry that still looms large over the Indian economy is the fiscal deficit – it is expected to be 6.9% of GDP in the current year and 6.4% in the next year. So, the recovery that is expected in the economy is going to be quite slow and painful. In fact, 20% of the total income is towards direct debt servicing – a fairly large amount — and the government still wants to expand the scope of borrowing by using sovereign green bonds. And, while there has been a lot of talk of increasing employment, no real roadmap has been suggested. Further, there is a mention of Rs 1.6 lakh crore to the states – it needs to be seen how much of this is normally due to the states (states’ share is already 17% of the revenue) and what is the extra amount that is being offered and when the amounts will be disbursed.
The fact that there have been no changes to personal income tax, and that too no changes for the last few years, is something of a negative. I guess there were a lot of expectations on the same and that is where there will be disappointment. Another point that I would like to highlight is that capital expenditure is only 4.1% of GDP in the coming year and no major outlay on health infrastructure. Coming out of Covid, one would have expected a significantly large outlay for the health sector.
On the financial market side, there was strong expectation that the government would come up with a definite strategy with respect to crypto currency, but here again, the expectations have not been met. Yes, the FM has stressed on digital banking and the instruction of a digital currency by the RBI, but the regulatory demand for banning of the crypto exchanges have not been addressed. In a sense, it seems like the government wants such exchanges to survive and is thereby creating the possibility of a backdoor entry for them. Taxation of virtual assets is a good step in this direction, but one needs to see the exact details.
The stress on digital learning continues, but there is no effort to address the issues of the huge learning gaps that digital education is bringing to the fore. Thus, such expenditure may be a drain on the economy without any major benefits. There has been a specific mention of interlinking of five rivers in South India. This has been spoken about for a long time and directly appeals to the local population in this belt. The only issue is how long it will take to materialize and what will be the environmental impact.
Karnataka had a lot of expectations from the budget in terms of infrastructure and railway allocation. However, none of that has been specifically mentioned or allotted in the budget – some generic expenditure comments are there, and one will have to wait and see which way the coin drops. At the same time, the establishment of the National Tele Mental Health Programme, with NIMHANS being the nodal agency with technology support from IIIT-Bangalore, will be a boost to these institutes and the ecosystem around it.
(The writer is Professor, Finance and Accounting, Indian Institute of Management Bangalore. Views are personal)