Measured steps & a leap to spend

  • Gs 3, Union Budget Editorial 

This Article Includes Pure remarks by the Editor INDIAN EXPRESS, Which also tries to gives us various perspectives on UNION BUDGET.


  • FM Sitharaman’s budget keeps a calm head as pandemic continues, and politics heats up. It bets on investment, desists from fiscal adventurism, holds back on privatisation.
  • According to Prime Minister Narendra Modi, the Union budget should be separated from elections since the former’s value “transcends our (political) divisions,” he stated.
  •  The budget proposed by Finance Minister Nirmala Sitharaman for fiscal year 2022-23 looks to take its lead from the Prime Minister’s urging.
  • The budget has refrained from measures that would put more money in the hands of people, despite the fact that elections in Uttar Pradesh, Punjab, Uttarakhand, Manipur, and Goa are on the horizon.
  • This includes increasing cash transfers to farmers under PM-Kisan from the current Rs 6,000 per year, as well as providing income tax relief to the middle class. The budget under MGNREGA has been reduced to Rs 73,000 crore from Rs 1,11,700 crore in 2020-21 and Rs 98,000 crore in revised estimates (RE) for 2021-22, a reduction of nearly half.
  • The budget, on the other hand, has placed a strong emphasis on increasing public sector capital investment. The Centre’s own capital expenditure (capex) for the upcoming fiscal year is projected at Rs 7.5 lakh crore, which is Rs 2 lakh crore more than the fiscal year 2021-22 RE and more than twice the fiscal year 2019-20’s capex of Rs 3.36 lakh crore.
  • This significant increase in government spending in the form of investment, as opposed to consumption, is a bold and welcome step forward. It is courageous because it refuses to succumb to the temptation of increasing spending in order to reap electoral benefits in the near run. Rural voters would have reacted positively to announcing an increase in the annual PM-Kisan benefit amount, for example, to Rs 9,000 per farmer, given the impending elections in which they would be participating. It’s a good thing since it considers the medium and long term. Investments in roads, trains, mass transit, irrigation, and rivers are required by the Indian economy in order to increase production while lowering logistical costs at the same time.
  •  Due to the lengthy gestation periods associated with such initiatives, only the government is now able to make investments in them.
  • These investments, in turn, have the potential to enhance demand for steel, cement, capital goods, and commercial vehicles, in addition to attracting further private capital.
  • Of course, there are hazards associated with using this strategy. The restoration to regular economic activity in 2022-23, which would hopefully be free of interruption from a fresh wave of illnesses, is one of the assumptions made in the model. However, the economy will continue to suffer as a result of the setbacks caused by the epidemic that have occurred during the previous couple of years. Poor and lower middle-class households have experienced income losses, as well as a large reduction in their savings. This will have a long-term impact on private spending by reducing the availability of credit.
  • It has also been necessary for the Modi administration to deal with the issue of limited resources at its disposal.
  • A worse fiscal deficit would have resulted from any attempt to increase consumption and investment at the expense of the economy.
  • The consequent rise in government borrowings would have resulted in an increase in interest rates, which would have harmed economic prospects.
  • The Centre’s total market borrowings are estimated to be a massive Rs 14.95 lakh crore, despite the fact that its fiscal deficit is projected to be smaller at 6.4 percent of GDP in 2021-22 (RE) as opposed to 6.9 percent in 2021-22 (RE).
  • Simply put, it was this factor that drove rates on the benchmark 10-year government bond to 6.83 percent on Tuesday, an increase from 6.68 percent the previous day, according to Bloomberg.
  • In that respect, Sitharaman has taken the correct decision. Furthermore, any fiscal adventurism would have backfired in the current global environment, in which countries and central banks are in the process of reducing the stimulus measures they implemented in response to the epidemic. To put it another way, 2022 is not 2020.
  • Having said that, there are several notable omissions from the budget. The most visible of them is the reduction in the aim for disinvestment in the economy. The audacity with which the government set a target of Rs 1.75 lakh crore in revenue from the sale of government stakes in public sector undertakings (PSUs) in last year’s budget was applauded. After revisions, the updated projections reveal that receipts will be modest at Rs 78,000 crore, despite a record amount of money being raised by the private sector, including companies such as Zomato, Paytm, and Nykaa.
  • Disinvestment is only expected to generate Rs 65,000 crore in revenue in the current fiscal year. As a result of the recent demonstrations by young people about restricted public job options amid suspicions of a “sell-off of national assets,” it is possible that this has occurred.
  • This time, there was no mention of privatisation or asset monetisation, whatever the explanation for this omission from Sitharaman’s budget address.
  • There has also been no move to boost urea pricing and put it within the nutrient-based subsidy scheme, nor has there been any attempt to phase out the existing open-ended minimum support price purchase of wheat and paddy, which is now in place. Prior to the 2024 general elections, it appears that such measures will be impossible to implement.

Concluding Remarks By Editor

  • In general, Sitharaman’s budget does not include any major shocks. It accomplishes a great deal of good just by refraining from committing harm. A collective sigh of relief has been heard by the markets, not only as a result of the increase in capital expenditures, but also as a result of the lack of any suggestions for additional wealth or inheritance taxes, or for any extravagant new initiatives. At this point, the emphasis must turn to the execution of initiatives that have already been devised, such as production-linked incentives and the ambitious Gati Shakti digital platform. Not only is it necessary to restore growth to the economy, but it is also a political imperative. It is critical to accomplish this in a financially responsible manner while also reducing overall government debt to far lower levels than the current 90 percent of GDP.


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