A balance between capital outlays and fiscal prudence

February 2, 2023

Context:

There are five issues that need to be analyzed in this Budget — three from a growth and fiscal stability perspective and two from a welfare perspective.

Growth Perspective

Continuity in the Path of Fiscal Consolidation:

- - The fiscal deficit target for 2023-24 (FY24) is to come down from 6.4% in FY23 to 5.9% in FY24.
  - The government believes that the economy is on a strong footing and no longer requires affirmative action.
Infrastructure and Capital Expenditure (Capex):
- - The government prioritizes high-multiplier capex as the best way to sustain growth and create jobs.
  - The increase in capex to ₹10 lakh crore is substantial and is supplemented by the ₹79,000 crores on affordable housing.

Revenue Front:

- - Direct tax sops are provided for individuals and MSMEs but may not lead to higher consumption.
  - Disinvestment and non-tax revenue numbers are interesting with ₹51,000 crores for disinvestment and lower transfers from the RBI expected.

Welfare Perspective

Social Sector

- - The focus is on providing last-mile connectivity and empowering women through self-help groups.
  - No significant increase in social sector expenditure, but some new initiatives towards skilling in education and health.

Transitions:

- - The Budget nudges transitions from the old tax regime to the new, from conventional to digital agriculture, from fossil fuels to hydrogen, from natural to laboratory diamonds.

The Test of the Budget

Improved Balance Sheets of Companies and Banks:

- - The private investment cycle is expected to generate more jobs, but demand remains a constraint.

Transition Out of Multidimensional Poverty:

- - 16.4% of the population is multidimensionally poor and an additional 18.7% is vulnerable to poverty.
  - The ultimate goal is to transition these groups out of poverty, which is the definition of “sabka vikaas”.

News Source: The Hindu