The three challenges that the economy is facing today are stagnation, inflation and inequality. How well has the Budget addressed them? Disappointingly, to say the least. The Union finance minister has chosen an extra conservative neoliberal choice of policies. Her faith seems to be more in appeasing the international finance capital and promotion of favourite domestic industrial houses to pull the economy out of stagnation through private investment and to contain inflation by easing the supply side. The poor and ordinary citizens are left at the mercy of trickle-down economics. This seems to be the plot.
In 2020–21, the year of the pandemic, private consumption and investment shrank. In 2021–22, there was a strange phenomenon in public expenditure in India when the overall government expenditure increased only marginally, 7.4% in nominal terms. Now, in the Budget estimate in 2022–23, the increase in overall expenditure is even lower at 4.8%. Some stimuli indeed!
This was primarily due to the obsession of the finance ministry to keep the deficits in check. This obsession has been contagious: Even the state governments preferred to keep as much as `3 lakh crore of borrowed money as cash surplus in their treasuries rather than spend it on the poor and needy, lest they offend the neoliberal rule that borrowed funds should not be spent on revenue expenditure, i.e. revenue deficit must be zero. In the current Budget, a course for fiscal consolidation has been chosen. Both the fiscal and revenue deficits are lower than the previous year.
The inflation does not figure much in the Budget perspective. The government seems to be comforted by the fact that the consumer price movement has been much lower than the wholesale price movement. This widening gap would sooner or later pull up consumer prices as well. The solution lies in rolling back the entire additional excise tax and cess that were imposed since the NDA came to power. The tax on diesel had been increased by more than nine times and those on petrol by over three times. The reduction in November was only around half of the burden. The loss of revenue on this count could have been more than compensated by removing the tax concession given to corporates. Obviously, the Union finance minister thinks otherwise.
As for the challenge of widening inequality and impoverishment of the poor during Covid times, startlingly revealed by the Oxfam Inequality Report, the less said the better. Despite tall talk about inclusive growth, we find that all the major expenditure heads addressing the poor and ordinary have remained at the same level of expenditure in revised estimate for 2021–22 or reduced. Take for example MGNREGA, whose allocation has been reduced by nearly 25%, from the revised estimate of `98,000 crore in 2021–22 to `73,000 crore in the estimate for 2022–23. Even if we compare it to the Budget estimate of 2021–22, there is no increase. Similarly, if you take the six core schemes catering to the poor, allocation has been slashed from `1.21 lakh crore in the revised estimate to `0.99 lakh crore in the current estimate. The anganwadis are to be smart. But their allocation has stagnated at around `20,000 crore.
The greatest surprise is that of the health sector, whose allocation, despite Covid, has stagnated at around `86,000 crore. In the background of the farmers’ agitations, if anybody had the illusion of the government adopting a more sympathetic stance towards cultivators, they are going to be disappointed. The allocation for agriculture and allied sectors has only marginally improved from `1.48 lakh crore to `1.51 lakh crore, by a precious 2.5%. Two related items in the expenditure, fertiliser and food subsidies, have been reduced by 25% and 28% respectively in the present Budget compared to the revised estimates for the previous year.
An important feature of the Budget has been a steady increase in the capital expenditure from `6.57 lakh crore in 2019–20 to `8.4 lakh crore in 2021–22 and `10.68 lakh crore in the present estimate. The great expectations are that this public capital investment will crowd in private investment, starting a virtuous cycle of growth. This increase in the capital expenditure has been made possible by an absolute squeeze on revenue expenditure for social and welfare schemes. It is going to be a forced march of billions of Indians to the 100th Anniversary of Independence.
Former finance minister of Kerala