Economic Climate and Budget 2023-24

I Satya Sundaram

The challenges facing the Indian economy include poor private investment, price rise, high unemployment, weak export growth and staggering current account deficits. The fiscal deficit rose to 9.2 percent of the GDP in 2020-21, twice the level recorded in the previous year. Of course, it came down to 6.9 percent in 2021-22, mostly because of rise in revenue. Now they hope to reduce it to 4.5 percent in 2024-25.

The emphasis of budgetary policy should be on higher provisions in infrastructure investment because of impressive fiscal multiplier for capital expenditure. A fresh look at subsidies is needed. For 2023-24, the subsidy outgo is expected to be Rs 4.25 lakh crore–just 1.4 percent of the GDP.

The Government so far failed to realise disinvestment targets. Instead of unduly depending on this source, the Government should support the MSME sector which is helping a lot in raising manufacturing output, employment and exports. Skill development for entrepreneurs is also important.

There is an urgent need to scale up in investment in national R & D from 0.7 percent to 4 percent of the GDP by 2047, with an interim goal of 2.5 percent by 2030, with industry contributing the major share. India is spending only 0.7 percent of the GDP on R & D. This percentage is 2.81 for America, 1.16 for Brazil, and 0.83 for South Africa.

The focus should be on employment generation. The urban unemployment is serious. The MGNREGA is not able to generate enough employment because of funds shortage and other irregularities. Government intervention is needed to boost wage employment.

The MSMEs sector should be provided with some more relief. It would benefit from an infusion of Rs 9,000 crore enabling credit flow of Rs 2 lakh crore with a 1 percent lower cost. Also, the creation of National Financial Information Registry repository and move from an accrual-based payment system to a cash-based one will benefit this vital sector. It is now possible to avoid delayed payments. Also, start-ups tax holiday has been extended up to March, 2024.

The Budget 2023-24 appears to have neglected rural sector. In fact, allocation for rural schemes is not impressive. It fell from Rs 2.43 lakh crore to Rs 2.38 lakh crore. With the cut in food subsidy, the poor will be forced to depend on the market. A scenario of higher growth and lower inflation seems unlikely. What is surprising is that the MGNREGA allocation has come down from Rs 73, 000 crore (revised estimate) for 2022-23 to Rs 60,000 crore for 2023-24.

The Budget proposed new age technology and digital platforms for farmers and rural entrepreneurs. This will ensure better access to farm inputs, credit and insurance.

The focus on rural development has shifted from schemes like MGNREGA to PM Awas Yojana (outlay of Rs 79,590 crore), Jal Jeevan Mission (outlay of Rs 70,000 crore) and Gram Sadak Yojana (outlay of Rs 19,000 crore). The stress is on social asset creation. However, the Government should have thought of revamping employment guarantee scheme as it confers direct benefits on farm workers.

PM-Kisan which entails cash payments to farmers has received Rs 60, 000 crore in fresh allocation. A new road map outlay to develop farmer’s cooperatives and promote natural farming has also been announced. The Centre has been giving food-grains free under the PDS (now called Pradhan Mantri Garib Kalyan Yojana). For this, the Budget has allocated Rs1.97 lakh crore in the Budget 2023-24.

The Finance Minister announced the agriculture accelerator fund which would provide funding to start-ups for coming out with innovative solutions which can also help in transforming agricultural practices.

The Government announced the world’s largest decentralised storage capacity in the cooperative sector which will help farmers store their produce and sell at the right time to get a fair price. New cooperative societies that are formed on or after April 2023 would be allowed an option to pay tax at a concessional rate of 15 percent, similar to what is available to new manufacturing companies.

A matter of concern is debt-servicing. The interest payments for 2023-24 will cross the Rs10 lakh crore. Overall debt of the Government is to go up from Rs 152.6 lakh crore to Rs 169.5 lakh crore in 2023-24.

 There is no proper planning for employment generation. The employment guarantee scheme (MGNREGA) suffers from leakages.

 Employment generation, coupled with improving quality of jobs, is very important for achieving inclusive growth. India needs an employment-led growth strategy.

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Vol 55, No. 33, Feb 12 - 18, 2023