The Union Budget: From shadow to reality

The figures presented in the shadow budget prepared for The New Indian Express come close to the basic framework of the actual budget of the Union Finance Minister. The total expenditure to GDP ratio is nearly the same at 15 per cent. The net tax revenue is 7.7 per cent of the GDP, virtually the same as 7.8 per cent in the shadow budget. And so on. It only proves that there is nothing unexpected or new in the budget framework.

The shadow budget also assumes a significant step up in capital expenditure. But the finance minister has bettered the expectations from Rs 8.15 lakh crore to Rs 10 lakh crore. As a result, instead of being 2.67 per cent of the GDP, Capital Expenditure is 3.33 per cent.  

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The rationale for raising the public capital expenditure is that it would crowd in private investment. But the puzzle is that private investment is not forthcoming despite higher government capital investment. The Gross Fixed Capital Formation (GFCF) to GDP in all years has been lower than the ratio of 32.6 in 2013-14 at around 31.3 until Covid, when it fell even more sharply. 

The key question is why is not the private sector investment crowding in. The Union Finance Minister, at one stage, had expressed her exasperation at the lack of interest of the private investors. Even the present budget does not provide an answer. 

Among many, one important reason would be a lack of fairness and transparency. A public policy geared toward creating a few champion investors leads to the minimum government being the maximum 
government when it comes to certain favoured corporates. The crisis in the Adani empire has cast a long shadow over the budget.

If the future is Amrit Kaal, the past under NDA had been Kali Kaal. Indian economy, which was growing at around 8.6 per cent per annum since 2003-04, decelerated under NDA to 3.1 per cent on the eve of Covid. Though even the economic survey has very carefully avoided it from the list of shocks that adversely affected the Indian economy, it was the demonetisation that triggered the downward slip. 

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India’s economic deceleration resulted from multiple policy failures of conservative fiscal and monetary policies. The present budget does not seem to have any new strategy to make up for the mistakes. The assumption of “a full recovery in FY22” is silly. The per capita GDP would still be below the pandemic level.  

The budget holds little relief for the rural poor whose employment and wages are fallen. The outlay on MGNREGS has fallen from nearly Rs 90,000 crore in 2022-23 to Rs 60,000 crore. The national social assistance program has been barely maintained at Rs 9,650 crore, at the same level as 2022-23. The outlay on National Education Mission and Health Mission is lower from the BE of 2022-23 of  Rs 76,700 crore by Rs 1,000 crore. The housing programme (Rs 90,000 crore) was expended in 2021- 22. In 2022-23 the expenditure was Rs 70,000 crore, and in the current year, the allocation is Rs 79,590 crore. 

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In short, the Union Budget 2023-24 does not open any new vista to usher in any Amrit Kaal. It does not even provide higher support for the poor and downtrodden not a very unexpected outcome from 
a budget, considering the recovery from the pandemic is full.